STAYING THE COURSE Report to Stakeholders 2004

Transcription

1 STAYING THE COURSE Report to Stakeholders 2004

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3 CONTENTS Staying the Course Chairman's Statement 4 Corporate Structure 9 Strategic Direction 10 Group Financial Highlights 12 Crewing a Champion Board of Directors 16 Key Personnel 22 Nurturing People 30 Corporate & Social Responsibility 37 Tracking the Winds Towards a Technology based Offshore & Marine Company 42 Tuning the Boat Excellence in HSE 54 Business Excellence 57 Enterprise Risk Management 58 Tacking the Course Significant Events 62 Review of Operations 66 Operational Centres & Facilities Worldwide 80 Global Contacts 84

4 Staying the Course

5 Strategy, teamwork, execution and speed make a champion. Leveraging our global network of 16 shipyards in nine countries, we harness talents, form strategic alliances and develop technological leadership to stay the course in providing quality products and services for our customers

6 CHAIRMAN S STATEMENT

7 Our response to the current market environment is to stay on course in providing quality products and services to all our customers on time and on budget. Strategy, teamwork, execution, speed and innovative research and development continue to enhance our reputation as the industry s provider of choice. Delivering Results Keppel Offshore & Marine (Keppel O&M) achieved another year of outstanding performance in 2004, riding on an improving rig market and a buoyant shipping industry. The global economy continued on a strong recovery path in Demand for hydrocarbon grew more than three per cent last year, the fastest recorded rate of growth since This has led to record oil price. World trade spurred by China s strong economy also recorded strong growth and freight rates were at very high levels, leading to record orders for ships of all types. Group revenue grew to S$2.39 billion, up 66% from S$1.44 billion in the previous year. Earnings also improved, by 40% to a record S$192 million. Return on Equity further improved from 21% in 2003 to 33.3% last year. We have again demonstrated a strong team spirit with the 'Can Do!' attitude, focusing on operational excellence and delivering results to our customers and other stakeholders. Staying the Course The offshore industry is highly cyclical and unpredictable. In just 12 months, drilling contractors saw a drastic change of fortunes, from a difficult year in 2003 to one in which utilisation rates rose much faster than anticipated. They are now expecting the market to tighten even further. Notwithstanding this, the overall mood is one of caution. Until day rates further strengthen, drilling contractors are choosing to upgrade and extend the lives of existing rigs as well as resurrecting old rigs from cold stack. Meanwhile, a new breed of rig owners is taking bold strides to enter the market with speculative orders on the back of an ageing rig fleet and growing concerns with the slow replacement of hydrocarbon reserves. 05

8 Leveraging our worldwide network of 16 shipyards in nine countries, we will continue to harness global talents, form strategic alliances and develop technological leadership to foster an environment that promotes innovative products and solutions as well as outstanding customer service. National oil companies such as PetroVietnam of Vietnam, National Drilling Company of Abu Dhabi and Gulf Drilling International of Qatar are also commissioning rig constructions. This trend is expected to grow with national oil companies' desire to take control of the destiny of their own hydrocarbon resources. International shipping also saw an increase in charter rates and new tonnages in The expanded world fleet presented more opportunities and a bigger market for shiprepair and maintenance. Our strong order book reflects these trends, registering a record S$3.1 billion worth of contracts by end 2004, and within the first three months of this year additional new orders amounting to S$2.2 billion. to nurture and develop employees, we increased our budget for EDS by 39% in Promising and high potential employees were sent to the Nanyang Fellows Programme as well as Executive Development courses at leading institutions in Singapore and overseas. To develop our existing technical talents, employees have been supported in their post-graduate and undergraduate degree courses at Cranfield University, University of Newcastle Upon Tyne, University of Strathclyde, Ngee Ann Polytechnic and Singapore Polytechnic. Looking ahead, we are intensifying our Talent Management Strategy (TMS) to identify, select, develop and retain talented people willing to work in the rugged environment of the offshore and marine sectors. In Singapore alone, we are investing over S$1.6 million in 2005 for new scholarships and the development of officers, a 38% increase over 2004 s budget. Elsewhere in the group, each shipyard is making significant effort in the context of their local environment to provide employment and train the workers, as well as to inculcate the group's core values, business excellence framework and the importance of Health, Safety and the Environment (HSE). 06 Our response to the current market environment is to stay on course in providing quality products and services to all our customers on time and on budget. Strategy, teamwork, execution, speed and innovative research and development continue to enhance our reputation as the industry s provider of choice. Leveraging our worldwide network of 16 shipyards in nine countries, we will continue to harness global talents, form strategic alliances and develop technological leadership to foster an environment that promotes innovative products and solutions as well as outstanding customer service. Developing People Our success is highly dependent on having a global workforce who works safely and is motivated, well trained, honest, creative, resourceful, prepared to be near clients and committed to provide value to our customers. Under our Employee Development Scheme (EDS), employees are sponsored for local and overseas development programmes to upgrade their skills and acquire the knowledge necessary to remain in the forefront of the industry. To underscore our commitment Enhancing HSE HSE continues to be one of our core values as we strive for a good and safe working environment for all our staff, subcontractors and customers. Such a commitment has resulted in a declining accident rate over the last 10 years, with 2004 recording the lowest ever accident frequency rate of 1.75 compared to 1.88 in the previous year. This is significantly better than the Singapore industry average of 3.4 and 3.0 in the last two respective years. Numerous project teams have been awarded safety incentive bonuses by customers, notably the TPG500 jackup platform for BP Shah Deniz in Keppel FELS and the P-48 FPSO conversion for Halliburton by Keppel FELS Brasil. Both achieved five million manhours without loss time incidents. Notwithstanding these achievements, it was most unfortunate that an accident, causing the loss of seven lives, occurred onboard the tanker Almudaina while it was undergoing repairs at Keppel Shipyard (Benoi). This accident serves to remind us that there are risks in shipyard work. We must continue to look at improving our work processes and safety procedures.

9 Investing in Technology Keppel O&M will continue to invest in, develop, use and leverage technology as a key driver of our business success. In the offshore industry, technological breakthroughs are largely a result of collaborative works amongst operators, contractors and designers. It is our philosophy to strengthen our collaborations with major customers, key vendors and partners to co-create unique values across a wide range of opportunities. We continue to apply our knowledge of market trends and deep understanding of our customers' requirements, our vendors' strengths and capabilities so as to build upon our expertise in jackup rigs, semisubmersibles and specialised vessels. A significant project undertaken in 2004 involved our investment in a joint venture with JCE Group of Sweden, in the construction of Safe Concordia, the first accommodation newbuild in more than 20 years, based on the highly successful hull design of the Semisubmersible Drilling Tender (SSDT) suite. This dynamically positioned vessel can accommodate 400 personnel for work offshore. In joint venture with J R McDermott, we have acquired several patents for floating production systems, including the Extended Tension-Leg Platform (ETLP) and the Single Column Floater (SCF) designs from ABB. These technologies will further enhance our capabilities and expand our range of deepwater solutions in line with market demand. We continue to invest in enabling information technologies to improve our operations worldwide. For this, we have received the CIO 100 Award in Focusing on Core Strengths Keppel O&M will continue to focus on those industry segments in which we have a competitive edge. These are mobile offshore drilling rigs, FPSO/FSO conversions, floating production units, shiprepair (especially of tankers and LNG carriers) and the newbuilding of offshore support vessels (OSVs) and tugboats. Our KFELS B Class jackup rigs are well received in the industry. As at February 2005, nine of the 20 total jackups under construction worldwide are of our proprietary KFELS B Class jackup design, seven of which were secured in Currently, there are five KFELS B Class rigs in operation, including ENSCO 106, which was delivered in January With their enhanced capability to drill deep gas and complex wells under high-temperature high-pressure environment, the KFELS jackup rigs continue to occupy a dominant position in the market for new capabilities jackup rigs saw a number of significant deliveries from our shipyards. Early in the year, Keppel AmFELS delivered the KFELS B Class jackup rig, Tonala, to Mexican owner Perforadora Central SA de CV, and a premium deepwater platform drilling rig to Pride International Services, Inc. for use on the BP Holstein Production Platform in the Gulf of Mexico was also a milestone for Keppel FELS Brasil. The yard delivered the P-48 FPSO to Halliburton Produtos in December. With a processing capacity of 150,000 barrels of oil per day, the P-48 is the largest FPSO conversion project to be undertaken in Brazil. The Keppel O&M group has undertaken several offshore projects, directly and indirectly, for Petrobras over the years. With the deployment of P-48 in the Caratinga field in Campos Basin, the floating production units completed by Keppel O&M will be producing a total of up to 605,000 barrels per day for Petrobras, which is one-third of the country's current national production. Following the P-52 award, Keppel O&M secured another engineering, procurement and construction (EPC) contract from Petrobras last year. The same consortium with our partner, Technip of France, won the P-51 semisubmersible production platform. Works on both P-51 and P-52 are making good progress. In the conversions segment, Keppel Shipyard completed the conversions of one FPSO, two FSOs, two shuttle tankers, and the upgrading of an Oil Storage Barge in At the same time, Keppel Shipyard received contracts for two FPSO jobs, from Bumi Armada and Bergesen Offshore. There were also five LNG repairs during the year. The expertise which we have accumulated for repair and maintenance of LNG carriers will enhance our capabilities to support the growth of LNG shipping as operators build up infrastructure to bring gas to market. Keppel Singmarine's concentration on the design and construction of specialised OSVs and tugboats have generated great momentum and has been well received in the market. 07

10 It delivered 15 OSVs and tugboats in 2004 and has 18 vessels under construction for delivery in 2005 and In addition, all three Anchor Handling Tug/Supply (AHTS) vessels built by Keppel FELS Brasil were delivered to owner Delba Maritima during the year. These were the very first AHTS vessels to be built in Brazil. Leveraging Global Presence We continue to pursue our "Near Market, Near Customer" strategy. During 2004, we capitalised on our presence in Brownsville, Texas, to secure a major newbuilding contract for two units of accommodation platforms from Pemex Exploration and Production through a consortium led by Keppel O&M. We also acquired the remaining shares in our Brazilian operations. FELS Setal is now a 100% owned subsidiary and has been renamed Keppel FELS Brasil. These developments have further strengthened our market position in Latin America, a region where major E&P spending is likely to be incurred in the coming years. Over in the United Arab Emirates (UAE), Arab Heavy Industries (AHI) has pushed further into the offshore industry with the successful award of several major refurbishment works for Saipem, Abu Dhabi s National Petroleum Construction Company (NPCC) and Qatar's Gulf Drilling International. During the year, Keppel FELS delivered the main hull sections of the TPG500 self-installing jackup drilling/ production/quarters platform to BP Exploration (Shah Deniz). Keppel FELS commitment to deliver the platform under a challenging fast-track schedule, our commitment to HSE as well as our presence in Azerbaijan through Caspian Shipyard Company (CSC) were keys to the award of the project. When BP approached Keppel FELS in March 2003 to undertake this project, a team of engineers was mobilised immediately to join the BP Shah Deniz Project Team in Paris and less than 12 weeks later, struck steel for TPG500. Within 12 months, the four hull strips were completed and left Singapore for the Caspian Sea. Following this successful completion, CSC was awarded a further US$20 million contract to integrate these hull sections in Baku, Azerbaijan. Meanwhile, we continue to fine-tune our Enterprise Risk Management system, Business Continuity Programme and Business Excellence Roadmap and Framework as we roll them out progressively in our yards overseas. In 2004, these were introduced at Keppel FELS Brasil and Keppel AmFELS. Salutations Finally, I would like to thank our staff for their dedication and hard work in delivering the results that all of us are proud of. I like to also thank their families for their support. My heartfelt appreciation goes to the Board of distinguished Directors for their invaluable contributions and counsel. I would also like to take this opportunity to convey my gratitude towards Dr Tan Kim Siew, who completed his term on the Board as at 22 March Dr Tan has helped in shaping and guiding Keppel O&M through the years and we thank him for his invaluable contribution. I am also grateful to our customers for their trust in us, and all our business partners for their support and cooperation. CHOO CHIAU BENG Chairman 28 March Keppel Kazakhstan also started its yard development work in Aktau, Kazakhstan. The company is expected to secure a major steel fabrication contract for the massive Kashagan Field in the Caspian Sea. This is further testament to the success of our "Near Market, Near Customer" strategy.

11 CORPORATE STRUCTURE Singapore Keppel FELS Ltd Singapore Asian Lift Pte Ltd Singapore Deepwater Technology Group Pte Ltd Singapore FELS Offshore Pte Ltd Brazil Keppel FELS Brasil SA USA Keppel AmFELS Inc Azerbaijan Caspian Shipyard Company Ltd The Netherlands Keppel Verolme BV Kazakhstan Keppel Kazakhstan LLP USA Brazil BrasFELS SA Keppel Offshore & Marine Limited Keppel Offshore & Marine USA Inc Bulgaria Keppel FELS Baltech Ltd Norway Offshore & Marine AS Singapore Offshore Technology Devt Pte Ltd Singapore Keppel Shipyard Ltd Singapore Keppel Singmarine Pte Ltd Philippines Keppel Philippines Marine Inc UAE Arab Heavy Industries PJSC Singapore Keppel Smit Towage Pte Ltd Singapore Maju Maritime Pte Ltd Singapore Blastech Abrasives Pte Ltd Singapore Alpine Engineering Services Pte Ltd USA Keppel Marine Agencies Inc Singapore Marine Technology Devt Pte Ltd Philippines Keppel Cebu Shipyard Inc Philippines Subic Shipyard & Engineering Inc 09

12 STRATEGIC DIRECTION KEPPEL OFFSHORE & MARINE Keppel Offshore & Marine aims to be the leader in its chosen segments of offshore and marine businesses by: Delivering value to customers and partners through excellent project management Strengthening our information systems infrastructure for more effective co-ordination and management of the Group's worldwide business operations Expanding the knowledge and technology base with clear product focus at each of our yards Replicating the Group's proven shipyard management systems in our other "Near Market, Near Customer" locations Promoting group-wide sharing of industry experience, expertise and best practices Striving for continuous improvements Creating alliances with trend-setting customers, designers and vendors to develop new products and solutions Establishing centres of excellence that would promote technological and business development Based in Singapore, the Group Headquarters provides and co-ordinates two main functions for Keppel O&M's worldwide activities. The first function is in providing Operational Services - including technology development, procurement, design & engineering and co-ordinating group facilities. The second function is Corporate Services, which supports the Group in finance, legal, human resources, information services and corporate development. With a network of 16 shipyards in strategic locations worldwide, the Group has the flexibility to manage resources and expertise, execute huge projects and bring costs down. Through the headquarters in Singapore, individual shipyards can draw on each other's capabilities to expand and enhance their products and services to customers. The Senior Management of Keppel O&M provide direction in the area of talent management. They place high priority in developing a corporate culture characterised by the 'Can Do!' attitude. They align the business focus of all of Keppel O&M's operating companies, and continue to steer the Group's Near Market, Near Customer presence. Through an in-depth understanding of industry trends, they provide leadership in research and development of new products, services and technologies that can add maximum value to customers. Strengthening our presence in promising markets Leveraging our global network for incremental businesses, enhanced cost-effectiveness and operational efficiency Our Senior Management are: Mr Choo Chiau Beng, Chairman & CEO Mr Tong Chong Heong, Managing Director & COO Mr Sit Peng Sang, Chief Financial Officer Mr Charles Foo, Managing Director (Special Projects) Implementing best practices in health, safety and environment and risk management 10

13 OFFSHORE MARINE SPECIALISED SHIPBUILDING STRATEGY The Offshore Division continues to strengthen its lead in the offshore oil and gas industry by striving to be a provider of choice and partner in solutions to reputable customers internationally. It builds intellectual capital in the design of offshore rigs, floating production systems and proprietary components. A key strategy is to expand its business by identifying potential growth markets and developing niche segments in frontier areas. Focusing on higher value added repairs, the Marine Division continues to strengthen its leadership position in shiprepairs and conversions. It seeks to acquire technologies to enhance repair services, and collaborates with clients and vendors to further develop specialised conversion activities. The key enablers of its business are technical expertise, reliability, versatility and quality services. Commitment to HSE and timely delivery are crucial aspects of its business strategy. The strategic direction of the Specialised Shipbuilding Division is to own and market basic ship designs and components to complement and strengthen its shipbuilding construction services. It continues to work towards a 'preferred partner' status through consistently providing value to its customers. BUSINESS The world leader in the design and construction of offshore jackup rigs, having built the most number of jackups on order in the last decade. The Division designs, builds and repairs the complete range of mobile offshore drilling units, floating production systems, production topsides and specialised vessels such as deepwater semisubmersibles, tension leg platforms and other highly sophisticated offshore vessels. It has a sterling track record of successful conversions of floating production units and jackup rigs. The yards actively involved in the offshore activity are Keppel FELS (Singapore), Keppel AmFELS (USA), Keppel FELS Brasil (Brazil), Caspian Shipyard Company (Azerbaijan), Keppel Kazakhstan (Kazakhstan), Keppel Verolme (The Netherlands) and Arab Heavy Industries (UAE). With more than a century of experience, the Marine Division has the capabilities and expertise to undertake the whole spectrum of repair, conversion and specialised modification works for a diverse range of vessels including tankers, LNG carriers, containerships and cruise vessels. Keppel Shipyard is the world leader in the conversion of Floating Production, Storage & Offloading (FPSO) and Floating Storage & Offloading (FSO) facilities, having completed the most number of projects since Besides Keppel Shipyard (Singapore), the others yards involved in shiprepair services are Keppel Philippines Marine (Philippines), Arab Heavy Industries (UAE) and Keppel Verolme (The Netherlands). The Specialised Shipbuilding Division has built up a track record of more than 400 newbuildings. It is presently focused on the construction of small to medium sized customised vessels including Anchor Handling Tug/Supply (AHTS) vessels, multi-purpose support vessels, tugboats and cable ships for a worldwide clientele. The yards that are involved in specialised ship construction are Keppel Singmarine (Singapore) and Keppel FELS Brasil (Brazil). Keppel AmFELS (USA), Caspian Shipyard Company (Azerbaijan) and Keppel Philippines (Philippines) are also capable of such new constructions. 11

14 GROUP FINANCIAL HIGHLIGHTS Consolidated Profit & Loss Accounts S$'000 S$'000 % Change Revenue 2,393,666 1,441, Operating Profit 244, , Net Interest Income/(Expense) (4,563) (5,636) -19 Share of Results of Associates 5,885 6,136-4 Profit before Tax 245, , Taxation (40,130) (32,085) +25 Profit after Tax 205, , Minority Interests (13,413) (11,427) +17 Profit before Exceptional Items 191, , Exceptional Items - (28,187) -100 Attributable Profit 191, , Economic Value Added 124,652 38, Keppel Offshore & Marine's revenue reached a record S$2.39 billion in 2004, a 66% increase over The higher revenue was due mainly to new contracts secured during the year which reached a record of S$3.1 billion. Operating profit increased 35% to S$244 million. Both the Offshore and Marine divisions reported higher profits. Net interest expense fell 19% to S$4.6 million because of strong positive cashflows from projects. Contributions from associates declined slightly to S$5.9 million. Profit before tax rose 35% to S$245.4 million. Attributable profit for the year was S$191.8 million, a 39% increase over The Group's key performance indicators continued to improve. Return on equity rose from 21% in 2003 to 33.3% last year, while economic value added was S$124.7 million compared to S$38.5 million in

15 Consolidated Balance Sheets S$'000 S$'000 Share Capital 332, ,277 Reserves 303, ,863 Shareholders' Funds 636, ,140 Minority Interests 44,082 36,402 Capital Employed 680, ,542 Represented By: Fixed Assets 705, ,131 Long Term Prepayment 22,378 27,060 Associates 73,029 76,489 Other Investments 10,706 7,519 Loans Receivable 2,384 12,490 Goodwill 98,118 70, ,166 1,026,486 Current Assets Stocks 177, ,585 Work-in-Progress (Cost > Billings) 97,399 82,737 Related Companies & Associates 24,117 44,201 Short Term Investments Debtors 599, ,865 Bank Balances, Deposits & Cash 745, ,149 1,644,698 1,021,790 Current Liabilities Creditors 762, ,336 Work-in-Progress (Billings > Cost) 432, ,772 Short Term Loans 25, ,943 Taxation 70,223 36,748 1,290, ,799 Net Current Assets 354, ,991 Non-Current Liabilities Long Term Loans 482, ,803 Deferred Taxation 102, ,840 Deferred Liabilities 1,407 1, , ,935 Net Assets 680, ,542 13

16 Crewing a champion

17 No man is a champion by himself. Working shoulder to shoulder, our people share a common vocabulary and the 'Can Do!' attitude. Together with strategic partners, they respond swiftly to changing winds of opportunities and powerful currents of growth trends, making tactical calls that distance themselves from competitors

18 BOARD OF DIRECTORS (From left) Dr Malcolm Sharples, Choo Chiau Beng, John Rossman Huff Choo Chiau Beng Chairman and Chief Executive Officer of Keppel Offshore & Marine Limited; Senior Executive Director of Keppel Corporation Limited; Chairman of Singapore Petroleum Company Limited and Singapore Refining Company Pte Ltd and SMRT Corporation Ltd. John Rossman Huff Chairman and Chief Executive Officer of Oceaneering International, Inc. Dr Malcolm Sharples President of Offshore Risk & Technology Consulting Inc, USA. 16

19 (From left) Teo Soon Hoe, Prof Minoo Homi Patel, Tong Chong Heong Tong Chong Heong Managing Director and Chief Operating Officer of Keppel Offshore & Marine Limited; Managing Director of Keppel FELS Ltd and Keppel Shipyard Ltd; Chairman of Keppel AmFELS Inc. Prof Minoo Homi Patel Head of School & Professor of Engineering, School of Engineering, Cranfield University, UK. Teo Soon Hoe Senior Executive Director and Group Finance Director of Keppel Corporation Limited. 17

20 BOARD OF DIRECTORS (From left) Stephen Pan Yue Kuo, Prof Neo Boon Siong, Dr Tan Kim Siew Dr Tan Kim Siew (From 15 March 1999 to 22 March 2005) Permanent Secretary (Defence Development), Ministry of Defence, Singapore. Prof Neo Boon Siong Director of the Information Management Research Centre (IMARC). Stephen Pan Yue Kuo Chairman of World-Wide Shipping Agency Limited. 18

21 (From left) Sit Peng Sang, Bjarne Hansen, Charles Foo Chee Lee Bjarne Hansen Senior Partner, WingPartners I/S, Denmark. Sit Peng Sang Chief Financial Officer of Keppel Offshore & Marine Limited. Charles Foo Chee Lee Managing Director (Special Projects) of Keppel Offshore & Marine Limited. 19

22 INFORMATION ON DIRECTORS Choo Chiau Beng Mr Choo sits on the Board of Directors of Keppel Land Limited, k1 Ventures Ltd and EDB Investment Pte Ltd and is a Board Member of Singapore Maritime Foundation Limited and Maritime and Port Authority of Singapore. He is member of the Nanyang MBA Advisory Committee. He is also Chairman of Det Norske Veritas South East Asia Committee and Council Member of the American Bureau of Shipping and member of the American Bureau of Shipping's Southeast Asia Regional Committee and Special Committee on Mobile Offshore Drilling Units. He is Singapore's Non-Resident Ambassador to Brazil. Mr Choo was conferred the Public Service Star Award (BBM) in August Tong Chong Heong Mr Tong is a member of the American Bureau of Shipping, Nippon Kaiji Kyokai (Class NK) Singapore Committee, Society of Naval Architects & Marine Engineers (USA), Singapore Institute of Directors and a Fellow of the Society of Project Managers. Dr Tan Kim Siew Dr Tan was appointed Second Permanent Secretary of Ministry of Defence in November He was re-designated as Permanent Secretary (Defence Development) on 3 January He is also the Chairman of Defence Science and Technology Agency in Singapore. Dr Tan was Deputy Secretary (Policy), Ministry of Finance, Singapore from 2001 to 2003 and Singapore's Chief Planner and CEO of the Urban Redevelopment Authority from 1996 to John Rossman Huff Mr Huff is a Director of Suncor Energy Inc. and BJ Services Co. He is also Director of the American Bureau of Shipping, a Trustee of Houston Museum of Natural Science, and a member of the Advisory Committee of The H. John Heinz III Center for Science, Economics and the Environment. Prof Neo Boon Siong Prof Neo was former Dean of the Nanyang Business School, Nanyang Technological University, Singapore. He is also non-executive Director of the Oversea-Chinese Banking Corporation Limited, Great Eastern Holdings Limited, The Great Eastern Life Assurance Company Limited, The Overseas Assurance Corporation Limited and Informatics Holdings Ltd. Prof Neo is a Board Member of the Securities Industry Council, National Community Leadership Institute, the Education Services Accreditation Council, Goods and Services Tax Board of Review, Income Tax Board of Review and the Institute of Defence & Strategic Studies. Prof Minoo Homi Patel Prof Patel has over 30 years experience of carrying out research on offshore oil and gas exploration and production platforms and the umbilicals and risers used to connect these to wells located on the seabed in very deep water. In particular, he has devised and patented combined air/water motion control systems for enhancing the performance of floating offshore platforms. Among the vessels that utilise these innovations are McDermott Marine's DB50 crane vessel, Cal Dive International, Inc's (CDI) Quantum 4000 vessel built by Keppel AmFELS and also CDI's Intrepid work vessel. He has written two text books in this field, has authored over 110 research papers and holds eight Patents. In 1989, he established a 'science park' Company to exploit industrial applications based on the output of his research and directed its development into a respected independent entity. Prof Patel became an Honorary Member of the Royal Corps of Naval Constructors in 1996 and was appointed a Fellow of the Royal Academy of Engineering in He is also Non-Executive Director of BPP Technical Services Ltd and Cranfield Aerospace Ltd. 20

23 Dr Malcolm Sharples Dr Sharples is a Registered Professional Engineer in Louisiana, Texas, and Ontario, Canada, a European Engineer and a Chartered Engineer (UK). He is a Member of the Society of Naval Architects and Marine Engineers (USA), the Society of Petroleum Engineers (USA) and the Institute of Marine Engineering Science & Technology (UK). He is Co-Chairman of the Floating Offshore Structures Committee organised under the auspices of the Canadian Standards Association. He is also affiliated with the Jackup Committee of the International Association of Drilling Contractors, and serves on the Board of Directors of the Offshore Energy Centre (offshore drilling rig museum and learning centre), in Galveston, Texas (USA) where he chairs the Hall of Fame Industry Pioneer selection committee. Stephen Pan Yue Kuo Mr Pan is the Chairman of SIGCO (Shipowners Insurance and Guaranty Company) Private Trustee Company Limited, Bermuda; Chairman of Assuranceforeningen GARD, Norway; Chairman of Asia Shipowners Committee, Lloyd's Register and Chairman of the Hong Kong Maritime Museum Trust. He is a member of the General Committee of Lloyd's Register, the DNV Chinese Technical Committee, the Executive Committee of the Baltic and International Maritime Council (BIMCO) and a Director of Jurong Port Pte Ltd. Bjarne Hansen Mr Hansen had been with A. P. Moller-Maersk for 46 years. He was a Partner of the Group from 1999 to 2001, where he moved to Singapore to assume the position as Chief Executive for Maersk s Asia Region as well as Chairman of A. P. Moller Singapore Pte Ltd. He also was Chairman or Board Member of all Maersk-affiliated companies in the Asia Region. In 2003, Mr Hansen resigned to establish WingPartners in Denmark. Throughout his career with the A.P. Moller-Maersk Group, he was involved in the entire spectrum of the Group s businesses including the positions as Chief Executive of Maersk Air as well as Maersk Contractors. From , Mr Hansen was elected President of International Air Carriers Association (IACA). He was also elected Airline Man of the Year in Denmark in Her Majesty The Queen of Denmark has bestowed a Knighthood upon Mr Bjarne Hansen. Teo Soon Hoe Mr Teo is the Chairman of Keppel Telecommunications & Transportation Ltd and Keppel Philippines Holdings Inc. He is also a Director of Keppel Land Limited, k1 Ventures Ltd, Singapore Petroleum Company Limited, MobileOne Limited, and Centurion Bank Limited (India). Sit Peng Sang Mr Sit is the Chief Financial Officer of Keppel Offshore & Marine Limited. Charles Foo Chee Lee Mr Foo is the Chairman of Keppel Singmarine Pte Ltd, Offshore Technology Development Pte Ltd, Marine Technology Development Pte Ltd, Keppel Philippines Marine Inc and Subic Shipyard & Engineering Inc. He is a Director of Keppel Shipyard Ltd, Keppel Tuas Pte Ltd and Prime Steelkit Pte Ltd. He is a Fellow of the Institute of Marine Engineering, Science & Technology (UK), the Royal Institution of Naval Architects (UK) and the Society of Naval Architects & Marine Engineers Singapore; and a member of Lloyd's Register Asia Shipowners Committee, American Bureau of Shipping (ABS) Southeast Asia Regional Committee and Singapore Institute of Directors, 2nd Maritime R&D Advisory Panel of MPA, Maritime R&D Centre of NUS and CORE Inaugural Advisory Committee of NUS. 21

24 KEY PERSONNEL KEPPEL OFFSHORE & MARINE (From left) Nelson Yeo, Tong Chong Heong, Sit Peng Sang, Choo Chiau Beng, Charles Foo, Michael Chia, Goh Boon Kiat Choo Chiau Beng Chairman & Chief Executive Officer Tong Chong Heong Managing Director & Chief Operating Officer Sit Peng Sang Chief Financial Officer Charles Foo Managing Director (Special Projects) Michael Chia Executive Director (Keppel FELS) Nelson Yeo Executive Director (Keppel Shipyard) Goh Boon Kiat Executive Director (Keppel Singmarine) 22

25 KEY PERSONNEL KEPPEL OFFSHORE & MARINE (From left) Fong Swee Theng, Wong Ngiam Jih, Wong Kok Seng, Chee Jin Kiong, Lai Ching Chuan, Jeffery Chow, Anthony Toh Chee Jin Kiong Executive Director (Human Resources) Wong Kok Seng Senior General Manager (Group Procurement) Lai Ching Chuan General Manager (Corporate Development) Wong Ngiam Jih General Manager (Finance) Jeffery Chow General Manager (Legal) Fong Swee Theng Group Facilities Manager Anthony Toh Group Security Manager 23

26 KEY PERSONNEL KEPPEL FELS (From left) Too Lye, Ian Chin Woon Kwong, Yeong Wai Seng, Chor How Jat, David Lee Yong Soon, Michael Chia Hock Chye, Aziz Amirali Merchant, Wong Fook Seng, Richard Tay Hock Heng, Tan Dek Joon Michael Chia Hock Chye Executive Director David Lee Yong Soon Financial Controller Aziz Amirali Merchant General Manager (Engineering) Chor How Jat General Manager (Operations) Wong Fook Seng Senior Project Manager Yeong Wai Seng Senior Project Manager Tan Dek Joon General Manager (Commercial) Too Lye Manager (Engineering) Richard Tay Hock Heng Shipyard Manager Ian Chin Woon Kwong Marketing Manager 24

27 KEY PERSONNEL KEPPEL SHIPYARD (From left) Lum Chee Kong, Louis Chow Wai Laye, Mah Chan Wah, Abu Bakar Mohd Nor, Jim Lim Jit Pok, Nelson Yeo, Daniel Chang Boon Kong, Tan Peng Pong, Fok Swee Yin Nelson Yeo Executive Director Jim Lim Jit Pok Financial Controller Daniel Chang Boon Kong Senior General Manager (Operations) Abu Bakar Mohd Nor General Manager (Operations - Benoi) Fok Swee Yin General Manager (Operations - Gul) Mah Chan Wah General Manager (Commercial - Shiprepair) Lum Chee Kong General Manager (Commercial - Tendering and Billing) Tan Peng Pong General Manager (Engineering & Development) Louis Chow Wai Laye Senior Project Manager (Commercial - Conversion) 25

28 KEY PERSONNEL KEPPEL SINGMARINE (From left) David Loh, Poon Tai Lum, Dr Arun Kr Dev, Hoe Eng Hock, Goh Boon Kiat, Lee Tai Kwee, Edmund Lek Goh Boon Kiat Executive Director Hoe Eng Hock Senior General Manager (Production) Lee Tai Kwee General Manager (Commercial & Business Development) Poon Tai Lum Assistant General Manager (Commercial & Marketing) Dr Arun Kr Dev Assistant General Manager (Technical) Edmund Lek Yard Manager David Loh Senior Manager (Marketing) 26

29 KEY PERSONNEL RESEARCH & DEVELOPMENT (Standing from left) Tong Chong Heong, Dr Arun Kr Dev, Dr Yip Hee Yan, Dr Foo Kok Seng, Aziz Amirali Merchant (Seated from left) Choo Chiau Beng, Charles Foo Choo Chiau Beng Chairman & Chief Executive Officer Keppel Offshore & Marine Tong Chong Heong Managing Director & Chief Operating Officer Keppel Offshore & Marine Charles Foo Managing Director (Special Projects) Keppel Offshore & Marine Dr Foo Kok Seng General Manager Offshore Technology Development Aziz Amirali Merchant General Manager (Group Design & Engineering) Keppel Offshore & Marine, and General Manager, Deepwater Technology Group Dr Arun Kr Dev General Manager Marine Technology Development Dr Yip Hee Yan Senior Manager (Research & Development) Keppel Offshore & Marine 27

30 KEY PERSONNEL Overseas Operational Centres Keppel AmFELS Inc Ho Cheok Yuen, President & Chief Executive Officer Tan Geok Seng, Executive Vice President Edmund Mah Soot Khiang, Chief Financial Officer Eric Phua Hwan Khoon, Vice President, Commercial Keppel FELS Brasil S.A. Tay Kim Hock, Chief Executive Officer Yong Chee Min, Deputy Chief Executive Officer Tommy Sam, Chief Financial Officer Keppel Verolme BV Harold Linssen, Managing Director Lim Teck Kee, Chief Financial Officer Arab Heavy Industries PJSC Leong Yew Kong, Managing Director Chan Lim Hong, General Manager Wong Wei Kei, Finance/Administration Manager Keppel Philippines Marine Inc Toh Ko Lin, President Yu Cheng Hee, Executive Vice President, Keppel Batangas Shipyard Agnes Barbara L. Lorenzo, Vice President (Administration) Keppel Cebu Shipyard Inc Geoff Phoon Chek Hoong, President Jerald Lee Quan Ti, Vice President (Administration & Finance) Subic Shipyard & Engineering Inc Charles Yap Giok Twee, President Richard Leong Yew Cheong, Yard Manager Caspian Shipyard Company Ltd Bill Kee Swee Boon, President Lawrence Quah Tiong Ann, Chief Financial Officer Keppel Kazakhstan LLP Bill Kee Swee Boon, Chief Executive Officer Ow Choon Yen, President James Tan Seng Nguang, Chief Financial Officer Offshore & Marine A/S Odd Skjaerseth, Managing Director Engineering/Technology Centres Keppel Offshore & Marine USA Inc Chow Yew Yuen, President John Purvis, Vice President (Technology) Keppel FELS Baltech Ltd Lyudmil Stoev, General Manager Keppel Engineering & Construction (China) Co Ltd Ho Jong Heng, Technical Manager Offshore Technology Development Pte Ltd Dr Foo Kok Seng, General Manager Deepwater Technology Group Pte Ltd Aziz Amirali Merchant, General Manager Marine Technology Development Pte Ltd Dr Arun Kr Dev, General Manager Representative Offices Keppel Marine Agencies Inc Michael Holcomb, President / Director (Texas) John J Bajor, Director (New Jersey) Keppel FELS Ltd (Vietnam office) Henry Sng Chye Hian, Manager Keppel Prince Engineering Pty Ltd Charles Chiam Toon Thong, Director Services Asian Lift Pte Ltd (Heavy Lift Services) John Chua, General Manager Keppel Smit Towage Pte Ltd (Harbour & Ocean Towage) Ben Chew, General Manager FELS Baku Lawrence Quah Tiong Ann, General Manager Employee Unions Keppel Employees Union Mahmad Mastan, President V. Loganathan, General Secretary Keppel FELS Employees Union Yap Huat Hin, President Attyah Hassan, General Secretary 28 Shipbuilding & Marine Engineering Employees Union Lim Chin Siew, Executive Secretary

31 Top row (from left): Ho Cheok Yuen, Bill Kee Swee Boon, Tay Kim Hock, Chow Yew Yuan Second row: Harold Linssen, Leong Yew Kong, Michael Holcomb, Toh Ko Lin Third row: John J Bajor, Geoff Phoon Chek Hoong, Charles Yap Fourth row: Henry Sng Chye Hian, Charles Chiam Toon Thong 29

32 NURTURING PEOPLE

33 Our Core Values Regardless of creed and culture, the Core Values of Keppel Offshore & Marine bring employees from different nationalities together in a common vision, to be the Provider of Choice and Partner in Solutions for our customers. "Can Do!" Having positive attitude, taking on challenges with enthusiasm Customer Focus Establishing good partnerships with customers, providing value-added products and services, on time and on budget Commitment to Health, Safety and Environment Achieving excellent health, safety and environment (HSE) standards, playing a part in protecting the environment Accountability Creating value for stakeholders, meeting obligations towards team members, customers, business partners, shareholders, the community and the environment Integrity Acting with integrity and honesty, earning the confidence and trust of co-workers, customers, business partners and shareholders Innovation and Learning Improving our products and business processes by continuous learning, training and developing new and innovative skills and knowledge Global Mindset Equipping our people by developing in them a mindset to expand our business globally Teamwork Working together as a team, delivering better results These core values underpin our collective strengths in offering proprietary products and innovative services, on time and on budget. 31

34 Keppel O&M is committed to draw talents from across the globe, and nurture them into a world-class workforce Nurturing Talent A company is as good as its people. To be the leader in our chosen segments of the offshore and marine businesses, we must identify and groom two types of leaders in our workforce - those who can take up management positions and those who will become specialists for different trades and technologies. Manpower distribution by country Philippines 6% Azerbaijan 4% Brazil 35% Others 10% With our international operations, we aim to draw talents from across the globe. We believe that employees of different nationalities bring with them a diversity of worldviews and perspectives. We seek to leverage this diversity for innovation, and to acquire new skills and knowledge to stay in the league with the best in the industry. We will continue to pursue our Talent Management Strategy to attract, retain and nurture talents, deploying them in positions which maximise their value and capabilities. Singapore 45% In Singapore alone, we have budgeted over $4 million for training in 2005, of which $1.6 million are for new scholarships and the Employee Development Scheme (EDS) for executives. With our growing orderbook, our total manpower strength saw a steady increase of 16.7% from 15,363 in 2003 to 17,927 in Close to 55% of our total manpower strength comes from our overseas operations. 32

35 The group continue to offer scholarships to promising students Keppel FELS was commended for assisting NTU in the industrial attachment programmes to better prepare their undergraduates for working life Attracting Talent Keppel O&M's ceaseless efforts to identify and build our talent pool can be seen in the scholarships that it awards to promising students from the polytechnics and universities. Developing Talent To underscore our commitment to develop our employees, we invested a total of $840,000 under the Employee Development Scheme (EDS) in 2004, which represented a marked 39% increase over Since the inception of the Keppel Group Scholarships in 1989, Keppel O&M has offered more than 60 scholarships to deserving undergraduates from the National University of Singapore (NUS) and the Nanyang Technological University (NTU). In 2004, six students out of 316 applicants were offered the scholarships. In co-operation with the Association of Singapore Marine Industries (ASMI), we have also been offering scholarships to polytechnic students under the ASMI Scholarship Scheme. More than 140 ASMI Scholarships, ASMI Marine & Offshore Technology (ASMI-MOT) Scholarships and ASMI Marine Engineering (ASMI-ME) Scholarships have been awarded to engineering students. Apart from beefing up our human capital for the future, the scholarships also serve to promote the offshore and marine industry to the wider student body. 22 scholarships were awarded in Training Hours Year per employee Employees were sponsored for local and overseas programmes to hone their management skills and to acquire technical knowledge to remain in the forefront of the industry. General Management programmes under the EDS include the Nanyang Fellows Programme and Executive Development courses at leading institutions like INSEAD and Chicago School of Business. In 2004, all senior managers went through the Management & Organisational Competencies for High Performance programme conducted by Professor Neo Boon Siong, former Dean of Nanyang Business School, and a Director of Keppel O&M. Technical courses sponsored under EDS include Master of Science by Research at Cranfield University, Master of Science in Marine and Offshore Technology by University of Newcastle Upon Tyne, Bachelor of Engineering in Naval Architecture & Ocean Engineering at University of Strathclyde. Diploma courses such as the Diploma in Technology at Ngee Ann Polytechnic and Specialist Diploma in Marine Engineering and Naval Architecture at Singapore Polytechnic are also part of the sponsored programmes under EDS. 33

36 Succession planning is critical in ensuring business sustainability and continuity Over and above the EDS, we also enhanced our continuous learning and development programme for all our employees. Training for each employee increased from 36 hours in 2003 to 46 hours in 2004, with a proportionate increase in expenditure from $347 to $475 per employee. A myriad of in-house and external programmes were held to improve the technical competencies of our employees. Some of these programmes were FPSO Programme/Floating Production Technology Programme, ISO Implementation Course and Skills Enhancement Programme. In 2004, we also collaborated with Ngee Ann Polytechnic to develop two customised programmes to meet the requirements of our business. These were the Marine Piping Course and the Mechatronics Course. Keppel O&M was awarded Authorised Training Centre to conduct MOST (Modular Skill Training) programmes by ITE for all the various yards within the Group. A series of NTUC-SRP (Skills Redevelopment Programme) training programmes were conducted to upgrade the skills of our employees. Some of these programmes were NITEC in Fabrication Technology and Welding. To date, 22 employees have already undergone such training. Keppel O&M was also selected to participate in the Place and Train Scheme by the Ministry of Manpower. This scheme serves to train new employees to bridge their skills gap and prepare them for attaining SEC (Skills Evaluation Certificates) 1 and 2 Technical Skill Standards so that they can contribute effectively to the company within a shorter time period. During the year, Keppel Shipyard (Benoi) had its People Developer Standard (PDS) status renewed, affirming its commitment to the continuous development of its employees via a comprehensive and structured system. 34

37 Keppel FELS was conferred the Gold Plaque of Commendation for its commitment to welfare and training and development to enhance our global operations. Secondments and short term attachments between local and overseas units were arranged so as to enable cross fertilisation of ideas and sharing of best practices and experiences. In August 2004, employees from the Human Resources and Procurement Departments in Caspian Shipyard Company in Baku, Azerbaijan, were attached to Keppel FELS as part of the global exchange programme. Inter-yard knowledge sharing forms part of the Group's global exchange programme Strengthening Best Practices To strengthen the management of our people and drive Human Resources (HR) best practices, we launched a technology-enabled HR system, the PeopleSoft eprofile for Keppel Shipyard and Keppel Singmarine in December The system allows employees to review, update and/or amend their personal information with greater ease and convenience. Implementation of eleave, ebenefits and eclaims is in the pipeline. Keppel FELS will also be adopting the full self-service system in Keppel FELS was conferred the I-Class in November The I-Class recognises organisations which has developed a framework for achieving innovation excellence. It also encapsulates our efforts in adopting a total approach to enhancing our innovative capabilities for business excellence. With 16 yards located strategically worldwide to better serve our customers, Keppel O&M is focused on attracting and developing talents with global mindsets Safety and Operations personnel from Keppel Batangas, Subic Shipyard and Keppel Cebu were also attached to the Singapore yards to gain wider and in-depth exposure to safety and project management. Industrial Relations The unions and management have fostered a cordial and harmonious relationship through the years to enable issues to be resolved amicably and effectively. Keppel FELS won the Gold Plaque of Commendation at the NTUC May Day Award for its strong support towards the labour movement. In 2004, a new Collective Agreement was successfully concluded among Keppel Shipyard, Keppel Singmarine, Keppel Employees Union (KEU) and Shipbuilding Marine Engineering Employees' Union. The KFEU Dinner & Dance was organised by Keppel FELS Employees Union (KFEU) on 21 February The event was graced by Mr Lim Boon Heng, the Secretary-General of NTUC and Minister (Prime Minister's Office). Mohd Shah, Welding Chargehand from Keppel FELS, did us proud when he was awarded the Singapore Labour Foundation (SLF) Model Worker Award and was rewarded with a SLF Education Tours prize. 35

38 Let by senior management, Keppel FELS employees turned up in force for the company s A.C.T.I.V.E day Employee Well-Being Keppel O&M's commitment to the social and mental well-being of our employees is demonstrated through our active promotion of a healthy lifestyle for our employees. In January 2004, more than 10,000 employees gathered at Sentosa for Keppel O&M's first Family Day. Graced by the Secretary-General of NTUC and Minister (Prime Minister's Office), Mr Lim Boon Heng, the event was a successful collaboration with the various unions, namely Keppel FELS Employees Union (KFEU), Keppel Employees Union (KEU) and Shipbuilding & Marine Engineering Employees' Union (SMEEU). The annual A.C.T.I.V.E Day at Keppel FELS was held on 4 December Led by senior management, more than 2,000 employees sweated it out under the guidance of professional aerobics instructors in the morning before work. Our employees made an impressive debut in the 22nd Singapore River Regatta when two of our teams powered their way to the top five spots in the finals of the prestigious competition. Despite their maiden foray in the dragon boating scene, Keppel Team A came in third, only seconds behind seasoned teams from ABN Amro and ExxonMobil. Keppel Team B clinched the fifth place. The Inter-SBU Games jointly organised by the Keppel Scholars Alumni Association (KSAA) and Keppelite Recreation Club (KRC) yielded much success with overwhelming response from employees across the business units in activities such as biathlon, soccer, basketball and pool. Camaraderie and team spirit was fostered through the games. This event was organised in line with the "Eat Healthy, Exercise Right" promotion. A series of health talks was also conducted to raise the awareness of a healthy lifestyle. Keppel FELS won the H.E.A.L.T.H Silver Award from the Singapore Health Promotion Board. 36 Emphasising the importance of healthy living amongst its employees, Keppel Shipyard launched a suite of health-centred activities including A.C.T.I.V.E Day and Free Fruit Day. The Health Promotion Board accorded Keppel Shipyard the Singapore H.E.A.L.T.H Silver Award, while Benoi yard garnered the Bronze Award. Activities are organised to foster camaraderie and team spirit among employees

39 CORPORATE & SOCIAL RESPONSIBILITY Keppel O&M co-sponsored the debut concert in Singapore by H.E. Mr Gilberto Gil, Minister of Culture, Brazil Social responsibility, community involvement and support of bilateral relations are core to Keppel O&M, and have been established as part of the corporate culture of the group. Singapore In March 2004, Keppel O&M co-sponsored the Singapore debut concert by Brazil's Minister of Culture, Gilberto Gil, at the Esplanade Concert Hall. (From left) Vietnam Deputy Prime Minister, H.E. Nguyen Tan Dung; Keppel Corporation Executive Chairman, Mr Lim Chee Onn and Keppel O&M Chairman & CEO, Mr Choo Chiau Beng In August, Keppel O&M supported Keppel Group initiatives to strengthen bilateral ties with Vietnam. The Group co-organised a regional conference, "Investing in Vietnam", held in Hanoi, with Temasek Holdings, the Singapore Government's investment arm. The conference attracted an overwhelming 600 participants hailing from across the region. We also sponsored the printing of 3,000 copies of the memoirs of the Kazakhstan Foreign Minister Kassymzhomart Tokaev in support of the Diplomatic Mission of Kazakhstan to Singapore. (Fifth from left) Kazakhstan Foreign Minister Kassymzhomart Tokaev meeting Singapore Ministers during President of the Republic of Kazakhstan, Mr Nursultan A. Nazarbayev s visit to Singapore in November 2003 (Picture taken from Minister Tokaev book, Meeting the Challenge ) Our community and charity effort is largely spearheaded by Keppel Volunteers, Keppelite Recreation Club and the Unions in fund raising events and activities such as Asean At Play, Charity Golf, Fun Run at Sentosa and Sesame Street Show. 37

40 Mr Hoe Eng Hock, Senior General Manager (Production) receives the SHARE Platinum Award from Singapore President S R Nathan Keppel Singmarine was conferred the SHARE Platinum Award by the Community Chest for its consistent support of the SHARE programme. Keppel FELS and Keppel Shipyard (Tuas) also received the Bronze and Gold Awards respectively for their continued support towards the SHARE programme. Keppel Shipyard clinched one Silver (Tuas yard) and two Bronze (Benoi and Gul yards) awards from the Singapore Health Promotion Board in recognition of the yards' efforts towards promoting a healthy work environment for its employees. In the same year, Keppel Shipyard (Tuas) was presented the Total Defence Commendation 2004 award for its strong commitment towards Total Defence. The year ended with a strong show by Keppelites that they care for the plight of the suffering. Staff of Keppel O&M generously contributed to the Tidal Wave Asia Fund via the Singapore Red Cross to help alleviate the sufferings of the 26 December 2004 Tsunami victims. International In Brazil, Keppel FELS Brasil's shipyard, BrasFELS Yard, was conferred the SESI Quality in Work Award. The prestigious competition was keen with big players like Volkswagen, Peugeot, Nestle and Petrobras vying for the accolade. The award is a recognition of best Keppel Cebu in the Philippines is a regular contributor to the local community practices in People Management, Health, Safety and Environment policy and cultural, welfare and social projects, all of which are indicators of the yard's fulfilment of corporate citizenry. With the accolade, BrasFELS is now recognised as one of the top socially conscious companies in Brazil and the best in Rio de Janeiro. In the United States, Keppel AmFELS continued to make significant economic, workforce and charitable contributions to the community in Brownsville. It also supported the University of Texas Brownsville/Texas Southmost College Scholarship, Brownsville Adult Literacy Center and Project Grad through donations. Contributions were also made in support of the needy children and women in the community. Arab Heavy Industries' (AHI) response to the call of social and corporate responsibility was reflected in its support of the Ajman Cultural Sporting Club and Ajman Municipality Cleaning Campaign. 38

41 Keppel AmFELS is an ardent support of Brownsville s charitable and community organisations. (From left) MD/COO of Keppel O&M and Chairman of Keppel AmFELS Mr Tong Chong Heong; Executive Chairman of Keppel Corporation Mr Lim Chee Onn and Chairman of the Board of Regents Mr Chester Gonzales Keppel Cebu continued its support of the government's "Dual Training System" project by providing on-the-job training for students from the Center for Industrial Technology and Enterprise. It also supported several worthy causes spearheaded by humanitarian organisations such as Kapwa Ko Mahal Ko and Children's Hour Foundations. Contributions were also made to the House of Hope, a drug rehabilitation centre, Emergency Rescue Unit Foundation and the Boy Scouts. As a steadfast supporter of the environmental protection and developmental programme of Cebu, Keppel actively participated in the International Coastal Clean Up Day organised by the local Lapu Lapu City government in connection with worldwide agencies. Keppel Verolme continued to play its part as a responsible member of the local community. It sponsored an awareness programme to alert motorists to youngsters on the road when the school term began. It also contributed to the regional society for the deaf. Employees are encouraged to participate actively in community services In Baku, Azerbaijan, Caspian Shipyard Company continued to make economic and workforce contributions by providing training to locals as part of knowledge and technology transfer to the Azerbaijanis. 39

42 Tracking the winds

43 The best equipment makes winning easier. To seize the winds and ride the waves, we research and develop relevant technologies, maximising the synergies of our systems and facilities to deliver value products and services, on time, on budget

44 SPECIAL FEATURE

45 Sustaining Growth Towards a Technology based Offshore & Marine Company A global leader in offshore and marine, Keppel O&M is involved in the design and construction of offshore rigs and supply vessels. Our other main services range from shiprepair and conversion to upgrading of rigs. Key Vendor Partnership CAD/CAE/CAM Construction Process Technology DTG Deepwater Rig Design JU Design OTD MTD We have consciously moved towards being technology driven by building up knowledge and expertise in high value projects, focusing on the business segments and customers we service. Project & IT Technology PROCESS COMMERCIAL VIABILITY Ship Design Critical Equipment Development OTD Our strategy for technology development is represented by the chart comprising four inter-related aspects. R&D Activity Specialised Capability/ Skill Development & Aquisition KNOWLEDGE BUILDING CUSTOMER NEEDS Drilling & Production Technology These four aspects of commercial viability, customer needs, knowledge building and process provide a balanced approach towards technological leadership that will sustain our long term growth and developement Keppel Professorship Business Units Technology Foresight Houston Centre Rig Systems Keppel O&M Engineering 43

46 SPECIAL FEATURE Commercial Viability - Our technology focus is to provide our shipyards with competitive advantage by offering proprietary designs of rigs and ships that have been identified to have commercial potential. The three main divisions driving this are Offshore Technology Development (OTD), Deepwater Technology Group (DTG) and Marine Technology Development (MTD). Customer Needs - Meeting customer needs is the next cornerstone of our strategy. It involves adaptation, customisation and optimisation of our designs to meet the specific requirements and operational demands of each of our customers. Knowledge Building - The third and vital technology strategy has to do with the guided development and acquisition of knowledge and intellectual capability. We are committed to keep in tune with technology development, so that we can provide market-relevant designs and products. Process - On the shop floor, we seek to use innovative construction processes and optimise the use of materials in the building of our rigs and ships. The aim is to improve the operational competitiveness and effective performance of our yards. Looking ahead, we are strengthening our efforts in Knowledge Building while continuing to push on in the other three aspects. Key to our strategy in Knowledge Building is developing technology foresight capability, grooming talents, institutionalising knowledge sharing, promoting innovation, collaborating with strategic partners and acquiring new technologies. Distinguished members of the Keppel Technology Advisory Panel (KTAP) who provide counsel and feedback on the strategic direction for technology will also guide us in our pursuit of becoming a technology driven group. 44 OTD will continue to develop and enhance the KFELS B Class design and critical components to meet the demand for deeper well drilling

47 Maersk Explorer, of the DSS-20 design, was developed by DTG in co-operation with Marine Structure Consultants Technology Foresight We subscribe to the concept of technology foresight by building a knowledge base in the sciences of the offshore and marine industries. This concept provides qualitative technology analysis that can help Keppel O&M understand what drives our customers, staff, sales channels and strategic partners. For this reason, we have established an engineering office in Houston to be closer to our customers, which facilitates the exchange of ideas in our pursuit of new and innovative solutions. Technology foresight also encourages research of medium to long term industry and market trends to determine product and market service requirements and translate findings to business units to facilitate generation of ideas for suitable programmes. One of the challenges involves redefining our role to maintain our competitiveness vis-a-vis a low cost country. By possessing technology we can remain a major industry player even if rigs and ships are being built elsewhere. Last but not least, the concept promotes the participation of our staff in relevant conferences and forums to help employees keep abreast of technological advancements. Talent Management Succession planning is a corporate responsibility of executive management to ensure sustainability and continuity. Whilst succession planning is for all levels, Talent Management focuses on grooming young talents for management and senior management. Another aspect of talent management is the nurturing of specialists for technological leadership. This is vital as we require a broad base of specialists to analyse, develop and execute complex technical solutions. In conjunction with Technology Foresight, we will build a wide spectrum of talents comprising operational managers and specialists to match our global competitors in staff educational profile. Sponsoring undergraduates in diploma and degree courses is a matter of routine. We are also focused on sponsoring Masters and Doctoral candidates who pursue courses or research relevant to our core businesses. 45

48 SPECIAL FEATURE Raissa Wandoo Alliance Yani Rig 104 HA-KU-S & HA-KU-M Submersible (<30ft) The entire mobile unit sits on the seabed during operation Designs: SB1000N, SB2000I-C Posted Drilling Barges: Yani Rig 104 (2003), Raissa (2003) Fixed Platform (100-1,300 ft) Compliant Tower (Up to 3,000ft) Permanently fixed to seabed, and do not move with wind and waves Keppel FELS built the integrated production/ accommodation platform for Wandoo Alliance (1997) Accommodation platforms HA-KU-S and HA-KU-M under construction at Keppel AmFELS (2006) Submersible Jackup Fixed Platform Jackup (up to 500 ft) Self elevating mobile drilling unit that stands on its legs on the seabed during operation KFELS A Class for harsh environment like the North Sea. Latest delivery: ENSCO 102 (2002) KFELS B Class for worldwide operation - 5 units in operation, 11 under construction - Latest deliveries: Atwood Beacon (2003), ENSCO 106 (2005) Compliant Tower (CT) Mini TLP Tension Leg Platform Tension Leg Platform (up to 6,000 ft) Platform that uses tendons to firmly anchor it to the seafloor Conoco s Jolliet Tension Leg Wellhead Platform (TLWP) (1989), by Keppel FELS Prince (2001), Keppel AmFELS Matterhorn (2003), Keppel FELS Atwood Beacon Matterhorn Conoco s Jolliet TLWP ENSCO

49 Offshore System Types Designed, Built or Converted by Keppel DSS51 Holstein Spar (up to 8,000 ft) Large cylinder supporting a typical rig platform, among the largest offshore structures. Uses cables and chains to anchor rig to seafloor Keppel AmFELS built the platform rig for Spar production platform Holstein (2005) Maersk Explorer P-52 Semisubmersible Drilling Rig (up to 10,000 ft) Consists of two longitudinal lower hulls called pontoons, and operating upper deck is above water Floater, yields to wind and currents of the sea Designs: DSS20, KFELS 8000 Latest delivery: Maersk Explorer (2003), Keppel FELS/CSC Latest design: DSS51 Semisubmersible Floating Production Unit (up to 10,000 ft) P-18 (1993), Keppel FELS P-23 (1998), Keppel FELS Under construction: P-52 (2007) and P-51 (2008) by Keppel FELS Brasil/Keppel FELS/Technip FPSO (Floating Production Storage Offloading) Truss Spar Classic Spar Cell Spar Semi-tender Semi-FPS (Floating Production Facility) Subsea Tieback West Alliance Semi-Drilling Tender (up to 8,000 ft) Consists of two longitudinal lower hulls called pontoons, and operating upper deck is above water Floater, yields to wind and currents of the sea Designs: KFELS SSDT 800, KFELS SSDT 3000, KFELS SSDT 3600 Latest Delivery: West Alliance (2001), Keppel Shipyard West Setia (2005), Keppel FELS FPSO (>4,000 ft) Ship-shape production facility Floater, yields to wind and currents of the sea Saga Varg (1998), built by Keppel FELS 19 FPSO/FSO units converted by Keppel Shipyard since 2000 Major projects include FPSO Brasil (2002), FPSO Falcon (2002) and FPSO Serpentina (2003) Latest delivery: FPSO Marlim Sul (2004), Keppel Shipyard FPSO Marlim Sul Safe Concordia Semi-Accommodation Platform (dynamically positioned) Design: KFELS SSDT 3600-GOM-C42 Latest Delivery: Safe Concordia (2005), Keppel FELS 47 Source of Reference: Offshore Magazine

50 SPECIAL FEATURE Worldwide Progression of Water Depth Capabilities for Drilling & Production (As of March 2004) Water Depth Feet/ (m) 12,000 11,000 10,000 9,000 8,000 7,000 10,011 (3,051.2m) 2003 DP Drilling; GOM AC 951 Transocean Rig: Discoverer Deep Seas Operator: Chevron Texaco 7,209 (2,197.2m) Camden Hills Field (GOM-2002) Operator: Marathon Oil Co. PRESENT 8,350 (2,545m) Atwater Producers Hub Floating Facility 7,040 (2,145.7m) Diamond Offshore Drilling Inc. Atlantis Field (GOM-2006) Operator: BP (3,657.4m) (3,352.6m) (3,047.9m) (2,743.1m) (2,438.3m) (2,133.5m) 6,000 5,000 4,000 3,000 2,000 6,380 (1,945m) 2004 Conventionally Moored Diamond Offshore Drilling Inc. Rig: Ocean Baroness Operator: Murphy Sabah Oil Co. 6,380 (1,920m) Deepest Floating Facility NaKika Field (GOM-2003) Operator: Shell/BP (1,828.7m) (1,523.9m) (1,219.1m) (914.4m) (609.6m) 1,000 (304.8m) 0 year Platform/Floater Exploration Futrure Denotes Current World Record Source: Offshore Magazine 0 Knowledge Management Knowledge resides with individuals and the challenge is to translate individual learning to organisational learning. The route that we take is to hold sharing sessions to capture the collective knowledge and facilitate instituitionalising into procedures. We have embarked on compiling a Directory of Experts to leverage the Global Engineering Management System (GEMS) and lessons learned into the Enterprise Information Portal (EIP). Apart from institutionalising group wide sharing of industry experiences, expertise and best practices, it is necessary to facilitate the development and acquisition of knowledge and intellectual capabilities. This can be achieved through collaboration and co-operation with trend-setting customers, designers, intellectuals and vendors. Innovation At Keppel O&M, we encourage thinking out of the box and in the process, harness new ideas to create value in new ways through products, services, technology, process, structure and strategy. Currently, our top three drivers for innovation are customer expectations, health, safety & environment (HSE) and quality systems. While these are important drivers, there is a need to create and enhance innovations from technology foresight and knowledge management. The Research and Development (R&D) gate process encourages innovative and creative thinking when projects are evaluated against current technology, commercial viability and infringement of patents. In R&D, we do more of the developmental work within the organisation and collaborate with universities and research institutes on the research work. Partnership Most technological breakthroughs in the offshore industry come from partnerships and collaborations amongst operators, contractors, shipyards and designers. OTD s current position as one of the global leaders in designing jackups and as suppliers of jacking and fixation systems is no exception. The company will continue to work with various parties to create value for the contractors and operators. OTD has collaborated with the National University of Singapore in spudcan studies for jackups and with the National University of Singapore and the Maritime and Port Authority in the evaluation of sandwich plate for offshore and marine construction work. OTD has also collaborated with the University of Western Australia in studies of spudcan interactions with soil. 48

51 MTD specialises in designing offshore supply vessels and harbour tugs for customers of Keppel Singmarine. In the short time since its formation, MTD has introduced several designs, including MTD 2745ASD (27 metre, 45 tons bollard pull Azimuth Stern Drive tug), MTD 2845TT (28 metres, 45 tons bollard pull Tractor Tug), MTD 6060A (60 metres, 60 tons bollard pull Anchor Handling Tug/Supply Vessel), and MTD 7025P (70 metres, 2500 dwt Platform Supply Vessel). Two of the designs have successfully been built and delivered to their satisfied customers, Gulfmark and Keppel Smit Towage. MTD is capable of designing diesel electric propelled vessels as well as carrying out DP plots for dynamic positioning in collaboration with specialised vendors. MTD is currently exploring collaboration with A*Star Institute of High Performance Computing in a project development to enhance propulsion.

52 SPECIAL FEATURE Modelling the entire vessel on TRIBON before actual fabrication facilitates construction and optimises functional requirements Keppel Shipyard has expertise in the repair of both the Moss and membrane cargo containment systems for LNG vessels Keppel FELS, in partnership with Swedish JCE Group, built a multi-service accommodation vessel, Safe Concordia, of the SSAU 3600-GOM-C42 design, in anticipation of expected strong demand for such offshore supporting units 50

53 The Extended Tension-Leg platform designs acquired by Keppel is a proven design, with the operation of the Magnolia (right) by Conoco Philipps in the Gulf of Mexico in 2004 DTG is a designer of submersible and semisubmersible platforms. Its designs have gained market acceptance with the successful operations of the deepwater drilling tenders (SSDT series) and drilling semisubmersible, Maersk Explorer (DSS-20). It has been involved in a design analysis programme with Statoil, ABB Lummus Global, Aker Kvaerner, Det Norske Veritas, Norwegian Petroleum Directorate and Health and Safety Executive (UK) to enhance design calculations of a semisubmersible. This project may lead to further collaboration with Nanyang Technological University's Maritime Research Centre. Keppel Shipyard is in collaboration with Dynamic Processing Solutions of UK in process engineering for FPSOs and with Cranfield University in multi-phase FPSOs. A leading shipyard for the docking of LNG ships with expertise in both Moss and membrane tanks, Keppel Shipyard is licensed by GTT for the repair of membrane containment systems. To further improve on work process and adopt new materials, Keppel Shipyard has entered into a partnership with Intelligent Engineering of UK in the use of Sandwich Plate System (SPS) for shiprepair and possibly in shipbuilding as well. Technology Acquisition Keppel O&M is one of the Founder Members of the Centre of Offshore Research & Engineering (CORE) in the National University of Singapore (NUS). This, in conjunction with the Keppel Professorship, exemplifies Keppel's commitment to collaboration in R&D work. Apart from developmental work, Keppel O&M is always on the lookout for technology that may no longer be core to other companies but useful in expediting the process of our technology enhancement. Recently we had the opportunity to jointly acquire patents with J R McDermott from ABB Lummus Global. The various patents are related to deepwater compliant platforms and tendons. Looking ahead, Keppel O&M will continue to use technology to strengthen our core competencies. With relevant technology, we will continue to differentiate ourselves from our competitors as the provider of choice, able to package total solutions with increased technological content and value-added products. This focus on technology complements our "Near Market, Near Customer" strategy by facilitating partnerships with customers throughout the life-cycle of our products. 51

54 Tuning the boat

55 Preparation pays dividends. We turn the tides to our advantage with proper groundwork, calculated risks and taking full health, safety and environment precautions to achieve excellent project execution

56 EXCELLENCE IN HSE Safety is a core value at Keppel O&M At Keppel Offshore & Marine, commitment to excellence in Health, Safety and Environment (HSE) is an important core value. We want to create a safe working environment for all our staff, subcontractors and customers. We also aim to protect the environment we operate in. Common HSE Platform Keppel O&M has adopted a common set of guiding principles in developing HSE Excellence plans, programmes and activities across all our shipyards worldwide. These HSE Excellence plans involve a Risk Assessment approach, where such assessment results are used to develop new safety programmes or initiatives. The safety initiatives include a job safety analysis cum basic hazard identification techniques which help mitigate potential risks and hazards present in an operation. These programmes are reviewed personally by Keppel O&M's MD/COO, Mr Tong Chong Heong, periodically to ensure all identified risks are managed and controlled with the right resources and actions. Keppel FELS is commended by BP Executive Vice President Mr Andy Inglis (left) for five million manhours without loss time incidents on the TPG500 jackup platform HSE Management Plan Operational HSE Management Plans are jointly developed with customers to align their respective corporate HSE policies with our yards' HSE practices. Some of these activities include behavioural and incentive reward programmes. At the operational level, potential hazards are identified and managed through a series of reviews, compliance checks and audits to ensure conformity with all applicable HSE rules and legislation and the HSE Management Plan. 54

57 HSE Awareness Creating awareness is also an important part of the total approach towards excellence in HSE. Annual promotion campaigns are organised at each Keppel O&M yard to further enhance safety awareness, reinforce standards and create an incident-free work environment. Some of these efforts include safety exhibitions, competitions and quizzes. In addition to in-house promotional programmes, safety tours to the Ministry of Manpower's (MOM) safety exhibition centre are also organised for the yard's safety committee members and project teams in support of MOM's drive to raise safety awareness among the industries. First implemented in 1996, ISO sets the international standard for environmental management systems. It applies to the environmental aspects over which a company has control and can be expected to have an influence. Keppel FELS also achieved the Occupational Health and Safety Assessment Series (OHSAS 18001) certification, an internationally recognised occupational health and safety management system to control related risks and improve performance. A Group safety newsletter, "HSE Matters", was launched in early 2005 to complement the individual yard newsletters and circulars. HSE Accreditation Our commitment to HSE is further affirmed by Keppel Shipyard's attainment of the ISO standard. As part of its Environmental Management System (EMS), the yard is committed to the social and environmental responsibility of waste minimisation and resource efficiency. Keppel Shipyard receives a bonus for excellent work on the conversion of FPSO Marlim Sul Petrobras honours Keppel FELS Brasil with the HSE/Engineering Awards for Hired Company of the Year

58 Accident Frequency Rates Keppel O&M Industry MOM Target * Frequency Rate: Total no. of reportable accidents (i.e. resulting in leave exceeding 3 days) per one million manhours worked * MOM's annual targets began in 1996 Achievements Keppel O&M's safety efforts have yielded results with the accident frequency rate declining progressively over the last 10 years. In 2004, Keppel's Singapore yards recorded the lowest ever frequency rate of 1.75 compared to 1.88 in This is significantly better than the Singapore industry average of 3.4 and 3.0 in the last two respective years. At the 2004 Annual Safety Performance Awards (ASPA) organised by the Singapore Ministry of Manpower, Keppel O&M's yards in Singapore achieved a distinction of 45 awards. The ASPA was introduced to recognise companies and major projects which have performed well in safety through the implementation of sound safety management systems. Customers have also lauded the yards for the good HSE record achieved by the numerous project teams. They awarded safety incentive bonuses to the teams which have achieved outstanding safety records without any loss time incidents. a safety bonus of $10,000 from Smedvig Asia for one million manhours worked without loss time incidents achieved by Keppel FELS on the building of the semisubmersible drilling tender, West Setia; a US$100,000 bonus from GlobalSantaFe Corporation for Keppel FELS' early completion of Adriatic XI and for the excellent safety performance on Key Gibraltar and Adriatic XI; a $1.5 million bonus for Keppel Shipyard's excellent performance from Single Buoy Moorings (SBM) with the successful 11-month fast-track conversion of FPSO Marlim Sul; a Gold award for Keppel Shipyard's innovative device, Grease Flyer, at the National SIT (Safety Innovation Teams) Convention; and an HSE Petrobras/Engineering Award for "Hired Company of the Year 2003", for Keppel FELS Brasil's superior Health, Safety & Environment and engineering standards. Two notable projects include the construction of the BP Shah Deniz TPG500 jackup platform at Keppel FELS, and the conversion of FPSO P-48 for Halliburton at Keppel FELS Brasil. Both projects hit five million manhours without lost time incidents. Other achievements in 2004 included: 56 a $10,000 bonus for Keppel FELS' achievement of 600,000 manhours without loss time incidents for the construction of the KFELS B Class jackup, Deepsea Ambassador, for Odfjell Drilling; The Davit Load Tester showcases the innovation of Keppel Shipyard employees in developing a less expensive and safer device to assess a load when it is being lifted by a crane

59 BUSINESS EXCELLENCE The BERF was implemented at Keppel AmFELS yard in Brownsville, Texas, in 2004 Keppel O&M is committed to provide our customers with quality products and services. We continue to innovate, invent and improve our work processes and practices. During the year, our yards achieved significant milestones in their pursuit of quality and innovation. Keppel FELS, through its Innovation & Quality Circles (iqc), encouraged employees at all levels to pro-actively improve their work processes through creative problem solving and thinking out of the box. The company fielded eight teams at the annual National IQC Convention and all of them returned with awards. One of the teams won the honour of being the first team ever to receive the Star award with their project entitled "Shortening time taken for TRIBON structure modeling", whilst six clinched Gold and one Silver. At the same convention, the debut participation of Keppel Shipyard (Gul) yard impressed the SPRING Singapore panel of judges, clinching the Star award for an innovative Davit Load Tester device. The yard also took home five Gold and six Silver awards. In November 2004, Keppel FELS successfully attained the Singapore Innovation Class award. Commonly referred to as I-Class, this award recognises companies which have developed innovative solutions for their customers. Keppel Shipyard's Continual Improvement Teams (CIT) Conventions continued to see enthusiastic participation from employees. 77 teams took part in the annual CIT Conventions held across Tuas, Benoi and Gul yards. Winning teams went on to represent Keppel Shipyard at the 7th Safety Innovation Team (SIT) Convention, organised by the Association of Singapore Marine Industries (ASMI), and was awarded the Gold award for their Grease Flyer invention. Keppel Shipyard also clinched one Silver and Bronze medal each. Subsequently, the Grease Flyer gadget won a Gold Award at the 10th National SIT Convention. Since Keppel FELS upgraded to the ISO 9001:2000 three years ago, the yard has continually improved its quality system requirements and effectiveness, thereby achieving successful re-certification from Det Norske Veritas (DNV) for another three years. It also maintained the prestigious Singapore Quality Class (SQC) certification for business excellence. Keppel Shipyard was accredited ISO 14001:1996 certification in recognition of its commitment to protect and care for the environment. Business Excellence Roadmap and Framework As part of Keppel O&M's drive for business best practices, Keppel FELS developed the Business Excellence Roadmap and Framework (BERF) in A structured approach to business excellence, BERF also embraces the Group's core value of a "Can Do!" attitude in delivering quality products and services on time and within budget. Following Keppel FELS' success in BERF, the roadmap was implemented at two overseas yards, namely Keppel FELS Brasil and Keppel AmFELS. In embarking on BERF, each yard was sensitised to the requirements for performance excellence, whilst taking into account local quality standards and cultural sensitivity. Looking ahead, the management of Keppel O&M plans to roll out BERF progressively to the rest of our yards worldwide to enhance the competitive advantages of these yards. 57

60 ENTERPRISE RISK MANAGEMENT Group ERM framework helps project teams identify, evaluate and manage day-to-day operational risks 58 Enterprise Risk Management Introduced in 2002, the Keppel Offshore & Marine Group's Enterprise Risk Management (ERM) framework provides a holistic, systematic process for identifying, evaluating and managing significant risks. In this on-going process, significant risks and appropriate mitigating actions associated with various value drivers to achieve our corporate strategies are identified and cascaded down from top management to the individual business units and departments. During the annual strategy meeting in Singapore, top management reviews the risk profiles in relation to corporate strategies. At the operational level, the risk management process is incorporated in day-to-day operating procedures as well as all significant projects handled by the Group. A large proportion of the Group's operations is projectbased and extends over a period of time. Keppel O&M management monitor major risks for each significant project at tender and execution stages using a standard risk template. At the tender stage, the risk template consists of various risk factors grouped under pre-tendering, competition, project, contract, execution, people and safety. This risk assessment process was applied to the evaluation of the US$639 million Petrobras P-51 contract, awarded to the Keppel FELS Brasil/Technip consortium in May 2004 for a semisubmersible production platform. Since pre-tendering preparations began in early 2003, the P-51 project teams had to consider the various aspects of risks especially those pertaining to technical

61 capability, human resources deployment, financial management and partnership arrangement when assessing the risk-return balance. Back-to-back warranties from suppliers and insurance protection were arranged to mitigate contractual risks. At the execution stage, the risk template consists of risk factors involving on-time on-budget delivery, quality control and meeting customers specifications. Although the Group has proven track records in executing similar production platforms such as Petrobras P-18 (in 1993) and P-27 (in 1998), the challenge for the P-51 and P-52 projects is to transfer the knowledge and skills from Singapore to its business unit in Brazil. As part of this process, the Brazilian team responsible for the construction of the lower hulls for P-51 visited Keppel FELS, where the P-52 lower hull is being built. Senior personnel have also been seconded from Keppel FELS to complement the Brazilian team. The progress of these two projects is monitored by management on a monthly basis. An external consultant was also engaged in 2004 to provide independent risk assessments of the P-52 and P-51 projects to identify critical risks and recommend mitigating actions. Management is also involved in regular reviews of risks significant to the fulfilment of the Group's business objectives. The system for internal controls, established by the Group, is designed to manage, rather than eliminate, the risk of failure to achieve the Group's strategic goals. Business Continuity Management To manage potential threats or disruptions to operations arising from unforeseen factors such as SARS, bird flu, terrorism and capital movement, a Business Continuity Management (BCM) framework has been incorporated as part of ERM. A BCM Committee was set up in 2003 to look into critical threats that could severely disrupt the yards' operations, and to develop action plans to mitigate these threats. Some of the critical threats identified are epidemics which affect staff in general, terrorism, damage to critical physical assets such as buildings, IT infrastructure, drydocks and cranes, and loss of critical supply chains. Championed by department heads, mitigating action plans addressing these critical threats have been developed to ensure business continuity. In addition, emergency plans have been drawn up to handle possible epidemic outbreaks. A disaster plan for IT infrastructure is also being implemented. To counter the threat of terrorism, the Group has engaged a Recognised Security Organisation (RSO) authorised by the Maritime and Port Authority of Singapore (MPA) to assess the yards' security procedures, and to revise the on-going security review process. This helps the yards comply with the International Ship and Port Security (ISPS) Code adopted by MPA, which took effect from July The detailed response plan covers various scenarios such as fire or sea intrusion by terrorists which may affect the yards' security. Fire drills and intrusion exercises were conducted during the year, to measure the effectiveness of the yards' security arrangements. Identifying risks early ensures we continue to deliver projects on-time, on-budget to their customers satisfaction 59

62 Tacking the course

63 We aim to be the first-mover in our strategy to be near market, near customer. Looking at the winds, landscape and currents, we plan how we will move, decide on the track and tack the course to outpace our competitors

64 SIGNIFICANT EVENTS January Keppel FELS divested its entire 75% interest in the company that owns jackup ENSCO 102 to ENSCO Offshore International Company (ENSCO) for US$95 million. March BrasFELS achieved five million workhours without a loss time incident on the FPSO P-48, the largest and most complex offshore conversion project undertaken to date in Brazil. February Keppel FELS signed a contract with the Skeie Group through Sinvest of Norway to build a KFELS B Class enhanced jackup for US$126 million. Keppel FELS entered into an agreement with ENSCO to build ENSCO 107, a KFELS B Class jackup, for a consideration of three rigs and US$55 million. Keppel FELS subsequently sold the three rigs to a drilling services company for US$55 million. This achievement [of five million workhours without a Lost Time Incident on the conversion of FPSO P-48 ] represents the excellence of the yard's HSE procedures and standards, which is very important to Petrobras. Mr Arnaldo Arcadier Production Units Project Manager (Barracuda and Caratinga projects), Petrobras ENSCO wishes to recognise and commend the highly professional performance of the Keppel FELS project team... involved in the onsite repair [of ENSCO 51 ] for a difficult job done very well, and most importantly, done SAFELY. This excellent performance has once again affirmed Keppel FELS' reputation for world-class, industry-leading rig repair services. Mr Terry L. Carr Rig Manager, ENSCO International Keppel Singmarine secured orders for four Anchor Handling Tug/Supply (AHTS) vessels from Groupe Bourbon and four harbour tugs from Keppel Smit Towage. Keppel AmFELS successfully delivered Tonala, an ultra premium KFELS B Class jackup unit, to Mexican owner, Perforadora Central SA de CV. Keppel FELS won a US$114 million order for a KFELS B Class jackup rig, Deepsea Ambassador, from Norwegian drilling services company, Odfjell Drilling. Keppel Singmarine secured an order for two customised and Keppel-designed AHTS vessels for SMIT Transport & Heavy Lift BV (SMIT). Keppel Shipyard received repair jobs for a fleet of seven product tankers from Consolidated Marine Management Inc (CMM). Keppel FELS, Keppel Shipyard, Keppel Singmarine and Keppel Verolme were certified to be in compliance with the International Ship and Port Facility Security (ISPS) Code. Keppel Shipyard received a $1.5 million bonus for excellent performance from satisfied customer Single Buoy Moorings (SBM) with the successful 11-month fast-track conversion of FPSO Marlim Sul. 62

65 April Keppel FELS entered into a 72/28 co-operation agreement with Smedvig Asia to build a US$94 million Semisubmersible Drilling Tender (SSDT), West Setia, based on Keppel O&M's proprietary design. May The Keppel FELS Brasil/Technip consortium received the Notice of Award from Petrobras Netherlands BV (PNBV) to construct a semisubmersible production platform, P-51, for US$639 million. Keppel FELS took home the Gold Plaque of Commendation by NTUC Union for exemplary commitment to staff welfare, training and development. June Keppel Shipyard secured the conversion of two shuttle tankers, Nordic Rio and Nordic Brasilia, for Teekay Navion Shuttle Tankers (TNST). July Keppel Singmarine delivered two highly sophisticated AHTS vessels, Pacific Silver and Pacific 28, to Pacific Richfield Marine (PRM). SMIT exercised its option to build an offshore support vessel with Keppel Singmarine. The Keppel O&M Group garnered a bumper crop of 45 awards, an improvement from 24 awards received in 2003, for exemplary safety practices and safety management systems at the Singapore Annual Safety Performance Awards (ASPA). Keppel FELS successfully completed the fast-track construction of four hull strips for TPG500 platform jackup rig for BP Exploration (Shah Deniz). I have been deeply impressed by the level of professionalism and commitment to the project (BP Shah Deniz TPG500 platform hull) - commitment which goes beyond the Singapore work phase and which sets a delivery standard that we must look to maintain, going forward. Everyone can be rightly proud of what has been achieved and Keppel FELS have definitely lived up to their 'Can Do' motto. Dr Rob Kelly President, BP Shah Deniz Caspian Shipyard Company (CSC) was awarded a US$20 million follow-up contract for the hull mating of the TPG500 hull strips in the Caspian Sea. Caspian Shipyard Company completed successfully the [upgrading of Derrick Barge Azerbaijan] in compliance with the schedule and with high levels of quality and safety standards, comparable only with the most reputable international shipyard companies. Mr Moreno Ferracci Project Manager, Saipem SpA 63

66 July (Continued) Skeie Group exercised its option to build a second KFELS Super B Class jackup with Keppel FELS for US$126 million. We have chosen to build another rig with Keppel FELS because the market interest in the KFELS Super B Class jackup rig is strong. The KFELS Super B Class jackup is a more superior deep gas drilling rig compared to other competing rigs, with its proven performance in the hookload, mud system and power generator capabilities. Mr Bjarne Skeie Executive Chairman, Sinvest ASA August Keppel AmFELS delivered an ultra premium deepwater platform drilling rig, which forms part of the BP Holstein project in the Gulf of Mexico, to Pride International. It is with great appreciation that I extend to Keppel AmFELS congratulations for the safety excellence that has been displayed since the start of fabrication on BP s project activity in Brownsville... that reflects the distinguished behavioral achievements that BP value in its business relationships. ENSCO 102, designed and built by Keppel FELS, was recognised as the "Jackup Rig of the Year" by a major oil company. Keppel Singmarine launched Zircon, an AHTS vessel for Chuan Hup Offshore. September Keppel Singmarine completed Jasper, an AHTS vessel, for Pacific Richfield Marine. Keppel Shipyard signed a LNG technical service agreement with Gaz Transport & Technigaz (GTT) which will allow Keppel Shipyard to access GTT's know-how in the design and maintenance of the membrane containment system. October Keppel Singmarine delivered AHTS Atlantic 18 to Hadi H. AI Hammam Establishment. Hadi H. Al Hammam Establishment and Keppel Singmarine's relationship has been warm and mutually beneficial. They have supported us with on-time deliveries of vessels. We still like to build our vessels here because of the confidence instilled by this very professional team of people. Mr T.K. Rajgopal General Manager, Hadi H. Al Hammam Establishment Your employees and all the participants that make safety happen everyday are to be highly commended. Mr Steve Garner Project General Manager, BP America Inc 64

67 November AMFELS was renamed Keppel AmFELS as the company leverages the Keppel and FELS brand names in its vision to further strengthen its presence in the Gulf of Mexico. Keppel Shipyard secured the conversion of FPSO Berge Helene from Bergesen Offshore. Keppel Cebu held its Centennial celebrations. Keppel Shipyard is licensed to offer the Sandwich Plate System (SPS) technology to its clients. December The Keppel SLP Consortium won a US$164 million contract to build two accommodation platforms in an international tender by PEMEX Exploración y Producción (PEP). Keppel FELS secured a US$110 million contract to build a KFELS B Class jackup, GULF-4, for Gulf Drilling International Limited (GDI), Qatar's first national drilling company. Petrobras presented Keppel FELS Brasil with an HSE Petrobras/Engineering Award for "Hired Company of the Year 2003", for the company's superior Health, Safety & Environment and engineering standards. Keppel Verolme secured a contract to build a Mobile Offshore Application Barge (MOAB) for Perenco UK Limited. Realising that this was a fast track and complicated repair work of the DPLV Lorelay, Keppel Verolme has approached this challenge with professional skilled personnel in an enthusiastic way resulting in the achieved result as completed. Mr Edward Heerema President, Allseas Keppel AmFELS clinched a contract for a sludge vessel from New York City Department of Environmental Protection. Keppel Shipyard received the ISO 14001:1996 environmental certification from Det Norske Veritas. Keppel FELS achieved five million manhours worked without any loss time incident during the hull construction of the BP Shah Deniz TPG

68 REVIEW OF OPERATIONS

69

70 Keppel FELS is the world's leading jackup rig designer and builder, having built the most number of jackups on order in the last decade Overview of 2004 Crude oil prices averaged US$37 per barrel for the first nine months of However, the year closed with crude prices surging to a high of US$55 per barrel following uncertainty over production, increasing demand and tight global supplies ahead of the Northern Hemisphere winter. The LNG shipping market grew, with 14 new LNG vessels delivered in 2004 bringing the total number in operation to 168. A record number of new LNG carriers were ordered. LNG exporting countries are expanding in their capacity, with Egypt becoming the 13th exporting nation. US LNG import continues to increase while India starts importing LNG. 68 The jackup market registered a demand of rig years in 2004, with utilisation improving to 89% from to 85% in The number of working rigs worldwide rose from 330 at end 2003 to 387 at end The worldwide semi market recorded an average demand of 114 rig years in 2004 and marketed utilisation of 82.7%. The deepwater sector continues to be robust in South East Asia, West Africa, Central & South America and US Gulf of Mexico. With the bright outlook for deepwater production, the FPSO conversion market recovered strongly in the second half and saw several projects being awarded. The storage conversion market for FSOs and shuttle tankers remained strong. The much-expected demand for offshore support vessels (OSV) in 2004 was well received by offshore vessel operators. The high utilisation driven by increased E&P activities in West Africa, South East Asia, Brazil, Middle East and Mexico has encouraged operators to expand and renew their fleet. The improving seatrade also resulted in heavy vessel movements for many ports, driving demand for tugs. With new LNG terminals expected to be built in the near term, there will be a knock on effect on the demand for terminal tugs.

71 At BrasFELS, the FPSO P-52 was accredited for its excellent safety records The Asian Hercules II is operated by Asian Lift which operates heavy lift cranes and has the largest floating crane vessel in Southeast Asia Offshore Keppel FELS Keppel FELS had a busy year in 2004 with major newbuilds in hand including two jackup drilling rigs, ENSCO 106 and Al Hail, for ENSCO International and National Drilling Company respectively; hull and living quarter structures for the TPG500 production jackup for BP Shah Deniz; the lower hull for the Petrobras P-52 platform and two partnership projects - a semisubmersible drilling tender with Smedvig and a multi-service accommodation vessel with JCE Group. The yard also commenced work on six new projects clinched during the year, including five jackups: two rigs for Sinvest ASA, ENSCO 107 for ENSCO International, and one rig each for Odfjell Drilling and Gulf Drilling; as well as the fabrication of column nodes for the Petrobras P-51 platform. CPP3 is operating successfully for PetroVietnam in the White Tiger field, offshore Vietnam Projects completed during the year included the CPP3 platform for PetroVietnam and several repair and conversion contracts. Major projects included GlobalSantaFe's (GSF) Constellation 2, Key Gibraltar and Adriatic XI, and Transocean's Searex IV. Other projects still in progress included JCE's Safe Astoria, Gulf Drilling's GULF-4 and Atwood Oceanic's Atwood Beacon. Keppel FELS' team of specialists also attended to several urgent on-location repairs, including ENSCO 51 and Smedvig's West Pelaut in Brunei; Rig 136 in Indonesia and GFS's Adriatic V in West Africa. These projects accounted for a record high of $863 million in annual turnover. 69

72 Noble Ronald Hoope at Keppel Verolme Keppel AmFELS built the ultra-premium deepwater platform drilling rig that forms part of the BP Holstein project for Pride International 70 Keppel AmFELS In the US, AMFELS was renamed Keppel AmFELS in November The company, which is involved in offshore fabrication work in the US Gulf, plans to expand its services to secure contracts for Jones Act vessels and jobs from the Mexican Gulf. It had a busy year, chalking up more than 4.3 million production hours. Several major contracts were secured, including four rig upgrades, two drydocking repairs and the construction of two accommodation platforms for PEMEX, Mexico's national oil company, and a sludge disposal vessel for the City of New York. Major completions during the year included a KFELS B Class jackup rig, Tonala, for Mexican customer Perforadora Central, the upgrade of the Ocean Titan rig for Diamond Offshore, the construction of a platform drilling rig for Pride International, the repair of the Ocean America semisubmersible for Diamond Offshore, the upgrade and repair of the ENSCO 68 jackup for ENSCO Offshore and drydocking of the Ocean Concord semisubmersible for Diamond Offshore. At year end, major works in progress included the SBX platform, the repair of the Ocean Warwick rig for Diamond Offshore and the refurbishment and life extension of the ENSCO 99 jackup for ENSCO. Keppel FELS Brasil In 2004, our Brazilian partner PEM Setal had to restructure its operations, and divested its entire 40% stake in FELS Setal to Keppel O&M. Now a wholly owned subsidiary, FELS Setal has been renamed Keppel FELS Brasil S.A. During the year, four manifold modules for P-43 and P-48 and two compressor modules for P-50 were completed in the Niteroi Yard. The BrasFELS completed the marine conversion and integration of P-48 and delivered the FPSO to Halliburton in December. The three UT722 Anchor Handling Tug/Supply (AHTS) vessels, Geonisio Barroso, Ivan Barreto and Haroldo Ramos, were completed and delivered to Delba Maritima. Keppel FELS Brasil received ISO 9001:2000 accreditation and its wholly owned subsidiary BrasFELS was commended by both Halliburton and Petrobras for achieving five million workhours without Lost Time Incident on the P-48 project. In September, Petrobras credited BrasFELS as Brazil's Offshore Construction Yard with the best Health, Safety and Environment (HSE) standards.

73 Assembly of the four main hull sections for the BP Shah Deniz TP500 jackup platform is progressing well at Caspian Shipyard Company BrasFELS designed, constructed and launched a 120m x 47m x 9m barge, the FS 1, in August. This barge will be used for the construction of the deckbox for P-52 and the marine mating operations for P-52 and P-51. Construction of the deckbox began at BrasFELS in June while work on the P-52 modules in the Niteroi Yard commenced in December. Caspian Shipyard Company Caspian Shipyard Company (CSC) in Baku completed several major projects in 2004 including the refurbishment of the Floating Dry Dock for BP Shah Deniz, the phase 2 upgrade of a derrick barge (DBA) for Saipem/Azerbaijan International Operating Company (AIOC), and the repair of Trident 20 for Transocean. BrasFELS laid the keel for Maersk's UT745L Platform Supply Vessel (PSV) Hull B-104 in March. The keel for the second Maersk PSV was also laid in Keppel Verolme Market conditions continued to be difficult for Keppel Verolme in Several offshore repair and conversion projects were either postponed by customers or withheld due to uncertainties in the market. On a positive note, Keppel Verolme has secured an order book of around EUR 35 million for the first half of The yard completed some significant conversions, repairs and upgrades for international clients during Vessels worked on included the Stena Dee, Lorelay, Noble Ronald Hoope, Monarch, ENSCO 72 and Maersk Guardian. The yard also secured a major conversion for the deepwater pipelay vessel, Solitaire. CSC was able to offer a detailed methodology for schedule adherence for the DBA project, resulting in its early delivery by two weeks and a bonus of US$200,000 for the company. Trident 20, which caught fire while drilling in Turkmenistan, was redelivered to Transocean 25 days ahead of schedule. Key to this was the early identification of long lead-time items and smooth coordination with specialist subcontractors. Another major work involved mating and jackhouse assembly of the hull strips for BP Shah Deniz's TPG500 platform. The first of four hull strips arrived from Keppel FELS on 16 October The fabrication of suction cans and helideck support for the TPG500 have also started. Meanwhile, yard development work at Keppel Kazakhstan is progressing, and the yard is expected to secure a fabrication project with AGIP KCO later this year. 71

74 2004 was a busy year for Keppel Shipyard

75 FPSO Marlim Sul was completed within budget in just 11 months Shiprepair & Conversion Keppel Shipyard Keppel Shipyard had a busy year in 2004, with improving repair profit and revenue. There was a steady stream of repairs from repeat customers such as Frontline, Ocean Tankers, AP Moller, NSB, MOL, NYK, K-Line, Gesco, World Wide, World Tankers, Pacific Richfield and Seabulk. There were five LNGC repairs in The year saw two LNG vessels arriving for their second time in the yard, namely Doha in April and Bishu Maru in May. Next to arrive in September were Al Rayyan (third time in yard) owned by K-Line and Golar Frost, managed by UK-based Golar LNG. The yard also repaired MOL-owned Al Bidda between October and November. Keppel Shipyard also completed one FPSO, two FSOs, two shuttle tankers and an oil storage barge (OSB). FPSO Marlim Sul which arrived at the yard in April 2003 for conversion, was redelivered in early March 2004 to repeat customer, Single Buoy Moorings Inc (SBM). Keppel Shipyard received a cash bonus of $1.5 million for excellent performance. Shuttle tankers Nordic Rio (seen here) and Nordic Brasilia underwent fast-track conversions at Keppel Shipyard The other conversions involved FSO Pattani Spirit for Teekay Shipping, M.T. Devsi for Mercator Lines Limited, and the shuttle tankers M.T. Nordic Rio and M.T. Nordic Brasilia for Teekay Norway Shuttle Tanker. Other projects included the life extension works on PAS Maritime's OSB Ladinda and Bumi Armada Berhad's FPSO Armada Perkasa, the conversion of product tanker Big One to the world's largest self-unloading Pneumatic Cement Carrier and the repair and upgrade of FPSO Berge Helene. 73

76 Keppel Shipyard is the leading centre for LNGC repairs in Asia, ex-japan Keppel Philippines Keppel Philippines Marine, Inc. (KPMI) registered revenue of 1.36 billion pesos in Its attributable profit at 138 million pesos was the highest in its history. The three shipyards under its wing turned in better results than in 2003, consistent with the buoyant shipping industry. 74 Keppel Verolme undertook significant marine conversions, repairs and upgrades for international clients in 2004 Keppel Batangas Shipyard saw an increase in shiprepair revenue by 34% over the previous year. Foreign vessels accounted for 55% of the repair revenue and domestic vessels for the balance. 124 vessels were repaired in 2004 compared to 117 in the previous year. The foreign vessels repaired were mainly Handymax or Handysize bulk carriers and general cargo vessels.

77 Arab Heavy Industries is proactively building up its track record in the repair and refurbishment of offshore structures The number of foreign vessels repaired increased from 12 to 17 and this accounted for 26% of total revenue compared with 13% in Subic Shipyard and Engineering enjoyed very high dock occupancy mainly from the repair of Panamax and Capesize bulk carriers and container liners. Clients from all over the world especially Japan, Taiwan, Singapore, Hong Kong, Norway and the United Kingdom brought to the yard a total of 42 vessels for a wide range of repair work including hull and cargo hold preservation, steel renewal and engine repairs. Keppel Batangas provided support in the installation of additional equipment and overhauling of guns onboard BRP Emilio Jacinto In the domestic sector, the yard repaired RORO/ passenger vessels, general cargo and container vessels. The yard also secured a contract to refurbish three Jacinto class patrol vessels for the Philippines Navy. During the year, it also sold a 45-ton bollard pull harbor tug. Shiprepair activities at Keppel Cebu Shipyard were high throughout Although the number of vessels repaired decreased to 76 from 86, sales revenue was 42% higher than the previous year, attributed to the conversion of two super ferries and a few other high value jobs. Arab Heavy Industries Over in the United Arab Emirates (UAE), Arab Heavy Industries (AHI) benefited from the high oil prices and buoyant shiprepair market. The company's expansion of its expertise in offshore work paid off with several major jobs secured. During the year, it successfully completed the refurbishment of jackup rig Perro Negro 3 from Saipem. It was also awarded two other offshore contracts to refurbish jackup barge SEP 350 for Abu Dhabi s National Petroleum Construction Company and jackup rig GULF-2 for Qatar s Gulf Drilling International. 75

78 Pacific Silver was one of the four AHTS constructed for long-time customer, Pacific Richfield Marine

79 Sister vessels Pacific 28 and Pacific Silver were christened at the Singapore Harbourfront in June 2004 A total of 15 vessels were delivered in 2004 including four AHTS vessels for Pacific Richfield Marine, two AHTS vessels for CH Offshore, one AHTS vessel for HADI Establishment, four tugboats for PSA Marine, two tugboats for Keppel Smit Towage and two tugboats for Maju Maritime. The yard is currently busy with 18 vessels slated for delivery in 2005 and Built for Keppel Smit Towage, KST Sedna has been commissioned for marine and coastal towage activities Outlook for 2005 Outlook for the offshore industry looks positive in 2005, with more newbuilding projects expected to materialise. Supporting this growth is the expected replacement for older generation rigs and the increase in exploration and production (E&P) activities, deep drilling prospects in shallow waters and deepwater offshore production. Specialised Shipbuilding Keppel Singmarine Keppel Singmarine's order book for 2004 grew substantially compared to 2003, with contracts for ten Anchor Handling Tug/Supply vessels (AHTS) and eight tugboats. Its continued emphasis on developing proprietary ship designs introduced in 2003 resulted in eight more tugboats and three more AHTS being contracted to be built on Keppel's designs. At present, most of the older generation rigs possess limited drilling capabilities. As an example, over 80% of the offshore jackup rigs worldwide are currently over 20 years old. Many of these rigs are technically incapable of being upgraded to satisfy modern drilling requirements such as for deep drilling or high temperature high pressure conditions. The Caspian Sea region is looking positive, with the bulk of activities taking place in offshore Kazakhstan and Russia. Outlook for the US Gulf of Mexico is expected to remain firm as spending by US operators 77

80 Keppel Shipyard is the leader in the FPSO/FSO conversion market, having converted 51 such vessels since remains steady. Meanwhile, Brazil continues to be a hotspot for deepwater activities. This is fuelled by the government s aim towards being self-sufficient in hydrocarbons. West Africa, with its notable deepwater discoveries continues to be another region with high growth expectations. More conversion projects should come on stream in 2005 compared to Keppel Shipyard is expected to benefit from this and the growing demand in the marine repair sector. The yard will continue to capitalise and enhance on its expertise to strengthen its position in these segments of offshore and marine markets. Although the shiprepair market has improved, intense competition from the Middle East and low cost countries like China, Vietnam and Indonesia will continue to impact the shiprepair business in Singapore. Repair demand for containerships is rising, supported by a rapidly expanding fleet to accommodate the import of finished goods by the USA and Europe from Asia. Yards located within major container ports such as Singapore are expected to benefit from the increase in container activities. Tanker repair remains the major source of revenue for Keppel Shipyard. However, tanker freight rates are unlikely to be as high as 2004 levels because higher fleet growth of 6-7% has not been met by a similar strong growth in tonnage demand. The world's LNGC fleet is projected to grow by 12% annually through Demand for liquefied natural gas from Asia Pacific markets is projected to almost double over the next decade, mostly from the established markets of Japan, South Korea and Taiwan. Strong growth in imports would come from the emerging markets of China, India and the North American west coast. On the supply side, new and existing producers from Southeast Asia, Australia, the Middle East and Russia could reach 110 million tons by 2010 and this will further increase the number of LNGCs trading worldwide. The overall demand for OVSs and tugboats will remain strong for 2005 driven by the replacement of an ageing fleet, new requirements from LNG terminals and new ports and growth in offshore and marine activities. At the same time, competition in shipbuilding is expected to intensify. Keppel Singmarine will capitalise on its strengths in offering value to customers through timely delivery of high quality vessels based on good designs. It is also exploring an opportunity for a low cost production centre to improve its competitive position.

81 Outlook for the offshore industry looks positive for 2005

82 OPERATIONAL CENTRES & FACILITIES WORLDWIDE Singapore Keppel FELS World-class designer and builder of offshore jackup drilling rigs, and a leader in the construction of deepwater semisubmersibles and other highly sophisticated vessels. Market leader in rig upgrading, conversion and repair. Keppel Shipyard A leader in Floating Production Storage and Offloading (FPSO)/Floating Storage and Offloading (FSO) conversions. Also the largest Liquefied Natural Gas Carriers (LNGC) repairer in Asia outside of Japan. Capabilities cover an entire spectrum of upgrading, conversion, repairs and drydocking of vessels ranging from tankers, container vessels, passenger ships and dredgers. Keppel Singmarine Vast shipbuilding experience in a wide range of vessels such as Anchor Handling Tug Supply (AHTS) vessels, sub-sea fibre-optics cable laying ships, Liquefied Petroleum Gas (LPG) carriers and chemical tankers. Netherlands Keppel Verolme An established yard with the widest graving dock in Europe measuring 90m wide and deepwater in front. Capable of repair and conversion of some of the world's largest ships and semisubmersibles. Provides integrated services and activities in offshore and marine, with substantial experience in offshore conversions and repairs and good engineering capabilities. Its comprehensive marine services include repair, drydocking, conversion and modification work on vessels up to VLCC size. Norway Offshore & Marine Engages in offshore and marine-related engineering and fabrication services. Philippines Keppel Batangas Shipyard Engages in repair and conversion of vessels up to 50,000 dwt. It also builds small to medium-sized vessels. Azerbaijan Caspian Shipyard Company Located in Baku, Azerbaijan, this yard undertakes rig and ship construction, conversion, upgrading and repair, servicing clients in the Caspian Sea region. Brazil Keppel FELS Brasil and BrasFELS One of the largest and best equipped offshore yards in the Southern Hemisphere. Undertakes rig and ship construction, upgrading, conversion and repair, servicing clients in South America. Also provides topside module fabrication services. Keppel Cebu Shipyard Engages in repair, conversion and building of vessels. Subic Shipyard & Engineering One of the biggest shipyards in the Philippines with drydock capacity of up to 340,000 dwt. Engages in repairs, conversions and drydocking of vessels. United Arab Emirates Arab Heavy Industries Engages in building, conversion, drydocking and repair of marine and offshore vessels, serving customers in the Middle East and internationally. Kazakhstan Keppel Kazakhstan An offshore engineering and construction facility located adjacent to the Aktau Sea Port, Kazakhstan. USA Keppel AmFELS One of the best-equipped offshore yards in the Gulf of Mexico, serving customers operating in the Gulf and internationally. 80 Offers rig construction, upgrading, conversion and repair.

83 GLOBAL NETWORK Norway The Netherlands Bulgaria Kazakhstan USA Azerbaijan China United Arab Emirates Vietnam Philippines Singapore Brazil Australia Headquaters Operational Centres Engineering/R&D Centres Representative Offices Marine Services 81

84 Dock Capacity Berthage Outfit Quay Type Capacity (Deadweight Tonnes) Size (metres) Length (metres) Draft (metres) Building Berth Capacity Length (metres) Depth (metres) SINGAPORE Keppel FELS Admiral Dock Drydock 400, x m 6.6m South Quay Berthspace 690m 7-10m West Quay Berthspace 130m 6m Shipyard Road Berthspace 250m 6-8m Keppel Shipyard (Tuas) 2,437m Tuas Dock Graving Dock 360, x m Raffles Dock Graving Dock 330, x m Temasek Dock Graving Dock 150, x m Temasek Pier East Berthspace 280m 7.2m Finger Pier West Berthspace 350m 9.0m Finger Pier East Berthspace 370m 8.5m Raffles Pier West Berthspace 430m 8.5m Raffles Pier East Berthspace 218m 6.1m West Quay Berthspace 380m 7.1m South Quay Berthspace 177m 8.0m Raffles Dock Entrance Berthspace 220m 6.6m Keppel Shipyard (Benoi) 1,163m Drydock No.1 Drydock 300, x 60 Drydock No.2 Drydock 170, x 60 Building Berth Slipway 190 x 40m Landing Quay 100m 5.0m Quay No m 7.0m Quay No m 10.0m Quay No m 8.0m Quay No m 7.0m Keppel Shipyard (Gul) 531m 6.5m FD No. 1 Floating Dock 14,000 lifting 190 x 32 FD No. 2 Floating Dock 5,000 lifting 120 x 27 FD No. 4 Floating Dock 7,500 lifting 158 x 23 North Quay 1 Berthspace 178m 5.0m North Quay 2 Berthspace 193m 6.5m North Quay 3 Berthspace 160m 6.5m Keppel Singmarine Drydock Drydock 7, x 18 Building Berth in Benoi 15 Slipway 190 x 40m Building Berth in Benoi 5 Slipway 80 x 27m AZERBAIJAN Caspian Shipyard Company Yusif Ibrahimov (Hull 901) Floating Dock 15, x m Floating Dock (Hull 953) Floating Dock 5, x m Floating Dock (Hull 806) Floating Dock 4, x m Jetty 3 400m 6.5m Jetty 4 100m 6.5m BRAZIL Keppel FELS Brasil (BrasFELS Yard) Drydock Graving Dock 125 x 70 Slipway No. 1 Slipway 35, x 30 Slipway No. 2 Slipway 150, x 45 Slipway No. 3 Slipway 300, x 70 Finger Pier East Outfit Quay 350m 7-8m Finger Pier West Outfit Quay 350m 7-8m Outfit Pier East Outfit Quay 300m 6-7m Outfit Pier West Berthspace 120m 7-8m Slipway 2 Pier Berthspace 80m 8-9m Slipway 3 Pier 1 Outfit Quay 80m 9-10m Slipway 3 Pier 2 Outfit Quay 80m 9-10m 82 Keppel FELS Brasil (Niteroi Yard) Loadout Pier 1 Load Out Berth 20m 3000T Loadout Pier 2 Load Out Berth 22m 6000T

85 Dock Capacity Berthage Outfit Quay Type Capacity (Deadweight Tonnes) Size (metres) Length (metres) Draft (metres) Building Berth Capacity Length (metres) Depth (metres) MIDDLE EAST Arab Heavy Industries AI Zora Drydock Graving Dock 30, x m Slipway No. 1 Slipway * 1, x 16 Slipway No. 2 Slipway * 1, x m Slipway No. 3 Slipway * 2, x 16 Slipway No. 4 Slipway * 3, x m Al Zora wharf Wharf 250m East wharf Wharf 200m West wharf Wharf 83m PHILIPPINES Subic Shipyard and Engineering Pacific Dock Graving Dock 350, x m Keppel Batangas Shipyard President Dock Graving Dock 50, x 38 FD No. 1 Floating Dock * 2, x 19 Ship Lift System Lift Platform 20, x 28 Dry Berth: 8 off Dry Berth: 8 off Pier No. K1 100m x 2 9.0m Pier No. K2 100m x 2 9.0m Alongside FD No m 8.0m Pier Block No m 9.0m Pier Block No m 9.0m Pier Block No. 3 82m 8.0m Pier Block No m 9.0m Keppel Cebu Shipyard Drydock Graving Dock 35, x 30 Slipway No. 1 Slipway * 2, x 7.9 Slipway No. 2 Slipway * 1, x 7.9 Slipway No. 3 Slipway * x 3.09 Slipway No. 6 Slipway * 4, x 10.4 Launchway Launchway * 1, x 8.0 Docking Quay 1 152m 7.0m THE NETHERLANDS Keppel Verolme 1,600m Dock No. 5 Graving Dock 65, x m 400m 9-12m Dock No. 6 Graving Dock 130, x 41 Dock No. 7 Graving Dock 500, x 90 USA Keppel AmFELS Floating Drydock (Rig mode) Floating Drydock 35, x m 10m 70,000 sq m 400m 8-10m (water front length) Floating Drydock (Ship mode) Floating Drydock 35, x 190 * Light Displacement Tonnage 83

86 GLOBAL CONTACTS Headquaters Operations Centres Engineering/R&D Centres Representative Offices Marine Services 84 Keppel Offshore & Marine Limited (Home Office) 50 Gul Road Singapore Tel: Fax: SINGAPORE Keppel FELS Ltd (Pioneer Yard 1 - Head Office) 50 Gul Road Singapore (Pioneer Yard 2) 55 Gul Road Singapore (Shipyard Road) 31 Shipyard Road Singapore Tel: Fax: marketing@keppelfels.com Contact Persons: Michael Chia, Executive Director Ian Chin, Marketing Manager Keppel Shipyard Ltd (Tuas Yard - Head Office) 51 Pioneer Sector 1 Singapore Tel: Fax: (Benoi Yard) 15 Benoi Road Singapore Tel: Fax: (Gul Yard) 55 Gul Road Singapore Tel: Fax: /7 ks@keppelshipyard.com Contact Person: Nelson Yeo, Executive Director Keppel Singmarine Pte Ltd 15 Benoi Road Singapore Tel: Fax: singmarine@keppelsingmarine.com Contact Person: Goh Boon Kiat, Executive Director Offshore Technology Development Pte Ltd 55 Gul Road Singapore Tel: Fax: felsotd@pacific.net.sg Contact Person: Dr Foo Kok Seng, General Manager Deepwater Technology Group Pte Ltd 50 Gul Road Singapore Tel: Fax: aziz.merchant@keppelom.com Contact Person: Aziz Merchant, General Manager Asian Lift Pte Ltd 23 Gul Road Singapore Tel: Fax: asianlift@asianlift.com.sg Contact Person: John Chua, General Manager Keppel Smit Towage Pte Ltd 23 Gul Road Singapore Tel: Fax: kst@keppelsmit.com.sg Contact Person: Ben Chew, General Manager AUSTRALIA Keppel Prince Engineering Pty Ltd Level 7, 3 Bowen Crescent Melbourne, Victoria 3004, Australia Tel: Fax: cchiam@oz .com.au Contact Person: Charles Chiam, Director AZERBAIJAN Caspian Shipyard Company Ltd South Bay, KMNF Basin Baku AZ1023, Azerbaijan Tel: Fax: csc@csc.az Contact Person: Bill Kee, President BRAZIL Keppel FELS Brasil S/A Rua da Assembeia, Rio de Janeiro, RJ, Brazil Tel: Fax: kimhock.tay@keppelfels.com Contact Person: Tay Kim Hock, President & CEO BULGARIA Keppel FELS Baltech Ltd 54 Debar Street Varna 9000, Bulgaria Tel: /7 Fax: (Engr) Fax: (Admin) office@fels.bg Contact Person: Lyudmil Stoev, General Manager CHINA/HONG KONG Keppel Engineering & Construction (China) Co. Ltd. Shenzhen Branch Office 6th Floor, Chiwan Petroleum Building Chiwan Road No. 3 P.R China Tel: , , Fax: (86) (China): hojh@keccsz.com (Singapore): jongheng.ho@keppelfels.com Contact Person: Ho Jong Heng, Technical Manager KAZAKHSTAN Keppel Kazakhstan LLP SEZ "Seaport Aktau" Aktau, Mangistau Oblast Republic of Kazakhstan Tel: / Fax: kepkaz@nursat.kz Contact Person: Ow Choon Yen, President NETHERLANDS Keppel Verolme BV Prof. Gerbrandyweg KK Rotterdam-Botlek Harbour no P O Box AA Rozenburg The Netherlands Tel: Fax: mail@keppelverolme.nl Contact Person: Harold W.M. Linssen, Managing Director NORWAY Offshore & Marine A/S Strandgaten Sandnes, Norway Tel: Fax: odd.b.skjaerseth@o-m.no Contact Person: Odd Skjaerseth, Managing Director PHILIPPINES Keppel Philippines Marine, Inc. Unit 3-B Country Space 1 Building Sen. Gil Puyat Avenue, Salcedo Village Makati City 1200 Philippines Tel: Fax: , mhq@keppelpm.com commercial@keppelpm.com Contact Person: Toh Ko Lin, President Keppel Batangas Shipyard Barrio San Miguel Bauan, Batangas 4201 Philippines Tel: to 36 Fax: kbs@keppelpm.com Contact Person: Yu Cheng Hee, Executive Vice-President Keppel Cebu Shipyard, Inc. Dad Cleland Avenue Lapu-Lapu City 6015 Cebu, Philippines Tel: to 89 Fax: , marketing@keppelcebu.com.ph Contact Person: Geoff Phoon, President Subic Shipyard and Engineering, Inc. Cabangaan Point, Cawag Subic, Zambales 2209 Philippines Tel: Fax: , to 84 all@subicship.com Contact Person: Charles Yap, President UNITED ARAB EMIRATES Arab Heavy Industries P O Box 529 Ajman, UAE Tel: Fax: ahiaeme@emirates.net.ae Contact Person: Y K Leong, Managing Director USA Keppel AmFELS PO Box 3107, South Highway 48 Brownsville, TX 78523, USA Tel: Fax: cheokyuen.ho@keppelamfels.com Contact Person: Ho Cheok Yuen, President & CEO Keppel Offshore & Marine USA 5177 Richmond Ave, Suite 1065 Houston, Tx 77056, USA Tel: Fax: yewyuen.chow@keppelom-usa.com Contact Person: Chow Yew Yuen, President Keppel Marine Agencies, Inc (Texas Office) 5177 Richmond Ave, Suite 1065 Houston, Tx USA Tel: Fax: mike.holcomb@kmaihouston.com Contact Person: Michael Holcomb, President/ Director (New Jersey Office) 15 Huddy Avenue, PO Box 417 Highlands, New Jersey USA Tel: Fax: keppelnj@comcast.net Contact Person: John J. Bajor, Director VIETNAM Keppel FELS Limited Petrovietnam Tower Suite 150M 9 Hoang Dieu Street Ward 1, Vung Tau City S.R. Vietnam Tel: Fax: henrysng@hn.vnn.vn Contact Person: Henry Sng, Country Manager

87

88 Keppel Offshore & Marine Limited (Incorporated in the Republic of Singapore) 50 Gul Road Singapore Tel: (65) Fax: (65) / Co Reg No: R