Following the collapse of Swiber Holdings, concerns are rife about the exposure of Singapore’s local banking sector to the oil and gas sector.

The offshore oil and gas service provider filed for liquidation late-July, after being unable to make payments to its creditors.

Swiber was a victim of the industry downturn. Since energy prices collapsed in 2014, investment in offshore assets and exploration has ground to a halt and the company had been issued letters of demand for payments totalling US$25.9mn.

Three weeks later, analysts have been scrutinising the books of the three Singaporean banks (DBS, UOB and OCBC), all of which are exposed to the energy sector, and which also have ties to the particularly volatile offshore services market.

A number of large loans are due to mature by the early months of 2017, with more companies in the space expected to default. Exploration firm KrisEnergy this week said that some covenants on its debt agreements will become stressed as oil markets continue to struggle.

DBS, the city-state’s largest bank, had US$700mn exposure to Swiber and its CEO voiced surprise after the company went belly up. After the collapse, it was revealed that DBS had given Swiber a bridge loan – the terms of which have not been revealed – on the expectation of an equity injection that never came, and on the strength of an order book that was worth north of US$1bn.

Of the three Singaporean banks, a note from Japanese bank Nomura shows that DBS has US$23bn exposure to the oil and gas sector, 8% of its total lending book; for OCBC it is US$14.3bn, or 7%, while UOB is exposed to the tune of US$14bn, or 6.6%.

While the debt is substantial, experts expect a rise in defaults, but not a fully-blown banking crisis. For one, the nature of the debt is simplistic: there are few unknowns in the vanilla world of oil and gas lending, where loans are usually secured by vessels and or equipment. Compare this to the confusion that mired the uber-securitised financial crisis of 2008.

“A banking crisis would only happen if the problem is complicated, huge and hard to comprehend,” Wee Siang Ng, Fitch Ratings

“A banking crisis would only happen if the problem is complicated, huge and hard to comprehend. One case in point: the lack of good understanding about CDOs when the saga unraveled in 2007. It was too complicated and the actual exposure was hard to ascertain.

“When the actual exposure is hard to quantify and believed to be huge – like in the case of the 2007 global financial crisis – it is much easier for fear to fester and snowball out of proportion. When this happens, a banking crisis such as a bank run could happen,” Wee Siang Ng, senior director, financial institutions at ratings agency Fitch tells GTR.

That said, Singapore is more heavily-exposed than most countries – despite not being an energy producer itself.

Kurt Metzger, a director at oil and gas consultancy GEM Advisory – accused the sector of being in denial over its indebtedness. It’s understood that some companies have restructured their bank debt, but Metzger told local press that the industry is “leaving it too late” to do so successfully.

“Swiber is one of several financially weak oil services companies that we are aware of. Note that there are also oil services companies whose FY15 accounts have been qualified by their auditors to be able to operate as a going-concern,” Wee Siang Ng says.

In particular, he “questions the abilities” of upstream oil and gas company KS Energy, subcontractor EMS Energy and RH Petrogas, an upstream oil field owner, to survive.

All eyes will be on the timetable of debts due to mature in the coming year. Next up is Trafigura, which has a US$255mn due for repayment in October. Ezra Holdings’ US$150mn loan is to mature in February 2017, with KrisEnergy’s US$30mn loan due the following month.

The macroeconomic implications of the industry’s collapse are also causing much stress in Singapore and throughout the Asean region.

Mahamoud Islam, Asia Pacific economist at Euler Hermes, tells GTR that the contagion affecting the banking sector is also eating into government coffers.

“What you’ve seen for example is in most of the commodity producer countries – Singapore is an exception because it’s a platform – but the impact of the lower prices has hit the banking sector, but more importantly the government. This has reduced expenditure and public investment,” he says.

This is expected to have an impact in Malaysia and Indonesia – both of which are heavily dependent on commodity exports. At a time when many governments are considering embarking on fiscal expansion, it is a cause for concern.

In Singapore, 20% of manufacturing jobs are directly linked to the offshore and marine industry – almost 90,000 jobs. The industry as a whole accounts for about 1.7% of real GDP, according to Nomura. Marine and offshore shrunk by around 30% in the first half of 2016.