Photo of Keppel Corp from Reuters

Temasek Holdings-owned Keppel Corporation revealed that it cut 10,600 jobs in 2016 due to the declining business in oil and gas exploration and falling oil prices. The bulk of the headcounts were in the Offshore and Marine division and 35% of the manpower in the division were retrenched.

This is the second high profile retrenchment exercise by Temasek Holdings assets that hit the news following a controversial retrenchment by construction consultant Surbana Jurong.

According to the Chief Executive of Keppel Corp Loh Chin Hwa, the worst is not over and that three shipyards in Singapore are also in the process of closing. Keppel Corp’s property and infrastructure investments helped cushioned some losses but it’s profits of S$784 million in 2016 were down 49% from the previous year. The corporation’s CEO commented:

“What we are going through is a very long harsh winter. It’s not business as usual. While spending by oil majors is expected to increase, we do not envisage a quick recovery for the offshore business, which continues to be under pressure from weak utilisation of the existing operating fleet, coupled with a supply overhang of new builds.”

Keppel Corp is pinning its hope of oil prices rebounding, pointing to the latest oil production meeting by oil producer countries to stem over-supply. However oil prices is likely to remain subdued as oil reliance has been severely cut by renewable energy sources and fuel-efficient technologies. Even if oil prices were to rebound, Singapore is also facing increasing direct competition from Malaysia which has recently announced billion dollar investments in its port infrastructures.

The falling profits of Temasek Holdings assets are likely to impact negatively on the return of CPF funds invested with the sovereign wealth fund company. With the rise of baby boomers looking to withdraw their CPF retirement fund in the present decade, the Singapore government will likely introduce new CPF changes to delay payment so as to ease the cash flow at Temasek’s.