Cleaning up the GULF oil and legal mess ...

With the ill-fated Deepwater Horizon rig sunken in the Gulf, there are now two similar rigs, along with the Discoverer Enterprise, a drilling ship; the Viking Poseidon, which knows how to install things on the sea floor; four mother ships for remotely operated underwater vehicles; various barges and supply vessels; and the Q4000 ( built by our KeppelAMFELS yard in 2002, see below for more detail about this rig ), a rig that specialises in repairing and closing wells. If the well that the Deepwater Horizon was in the process of closing off four weeks ago continues to spray oil into the sea for months to come, it won’t be for a lack of expensive, sophisticated and improbable-looking hardware a mile up above it.

Deployment of vessel and WI rig to plug the leak -

Sketch of Well Intervention With Help of a Vessel and a Semi

It is that mile which is the problem. The oil industry has been fixing blowouts for more than a century. The challenge is doing it under 150 atmospheres of pressure ( i.e. 5000ft below sea level ) with the tools and lights of a robot mini-submarine that gets its power and instructions by way of a cable. Under such environmental conditions, even the well orchestrated planned can come hit a snag, as it did when icy methane hydrates that form when natural gas gets mixed up with cold water at high pressure foul the plan to funnel the leaking oil up to Discoverer Enterprise. The hydrates did not just clog the pipes, they also buoyed up the 125-tonne cofferdam that had been lowered over the leak, lifting it right off the sea bed. [ Well, this phenomenon was not even in the eyes or expectation of all the experts BP has supposedly mobilised to study the viability of the cofferdam method it seems ! ]

On May 16th, though, oil did start to be collected by applying a subtler intervention. Oil is currently escaping from two leaks, one at each end of the well’s riser. The riser connected Deepwater Horizon to its blowout preventer, a stack of valves on the sea floor which marked the top of the well proper. When the rig sank, the riser broke near the top while remaining attached to the blowout preventer at the bottom, bending itself like a pretzel in its subsequent collapse. Some oil is now flowing from where the riser and the blowout preventer meet; most is coming from the broken end of the riser, which has ended up about 300 metres away on the sea floor. It is from a tube slipped into that distal end that oil is now being pumped up to Discoverer Enterprise and its attendant barges.

The insertion device, about a fifth of the diameter of the riser itself, is not supposed to block the flow of oil completely. If it did, the pressure of the oil would blow it out of the riser like a cork in a hose. Instead it sucks at the oil flowing around it, but gauging how hard to suck is tricky. Without enough suction more oil than necessary would continue to leak out; too much and it will let in water which will make the formation of those pesky hydrates more likely. Other anti-hydrate measures include a small pipe feeding methanol, an antifreeze, into the maw of the riser, and hot water circulating through a sleeve to warm the pipe bringing the oil to the surface. According to Kent Wells, vice-president of BP, the oil company in overall charge of the project, the amount of oil coming up through the pipe had risen to 2,000 barrels a day by May 17th.

The next step is to try to staunch the flow proper with drilling mud, a mixture of water and clay minerals. The well is gushing because of the pressure the oil is under in its reservoir 4,300 metres below the sea bed. If drilling mud can be forced into the well under even greater pressure—a technique called “top kill”—it will eventually reach a depth where the weight of the column of drilling mud exerts enough pressure to stop any oil flowing upwards.  [ More about well kill when I start to upload from my archives ...]

To do this, BP has been replumbing and rewiring the blowout preventer, paying particular attention to its choke pipe and the kill pipe. These provide access to the central bore of the well underneath most of the heavy valves which should have closed off the flow of oil, but for some reason did not. The two pipes, which originally went up to the Deepwater Horizon, have been reconnected with heavyweight hoses to a metal framework called a manifold that has been installed nearby. Above it the Q4000 rig and three attendant vessels have 50,000 barrels of peculiarly heavy drilling mud and pumps capable of providing 30,000 horsepower ( ie. from the High pressure mud pumps ) with which to muscle that mud into the well.

Q4000 Well Intervention Rig

Q4000

The blowout preventer’s control pod, which was also originally connected to the lost rig, has been taken up to the Q4000, where it has been tested and attached to new cables. The pod should soon be on its way back down for reattachment to the preventer. The Q4000 will then have control over the valves that connect the choke and kill lines to the well proper. One reason why all this is taking time is that there are now up to 14 remotely operated underwater vehicles working around the well. A “simultaneous operations” unit is needed to choreograph the complex dance of vessels, submersibles and rigs.

Once the control pod has been reinstalled on the blowout preventer and the manifold is attached to the Q4000, the top kill could start. The control pod ( refer to my earlier blog article or do a quick search on this word ) will open the valves that allow the drilling mud to be forced into the well. At that point the fluid-dynamics equivalent of a titanic arm-wrestling match will get under way, with the surface vessels’ pumps trying to push the mud down the well while the rising oil tries to push it out.

If the oil wins, then the team will try a “junk shot”. The manifold has two containers full of various sorts of rubber and plastic that are particularly good at gumming things up. Open and close a few valves on the manifold and the drilling mud from the surface can squirt one of these junk shots down the pipes and into the blowout preventer. The oil pressure will force it up into the heart of the stack of valves. There, by making it harder for anything to get out of the top, the junk will give the drilling mud a better chance in a second bout of arm wrestling. The second container of junk provides another shot.

If both barrels fail there is the possibility of putting a new blowout preventer on top of the old one. That would mean cutting the existing riser, but now that the siphon inserted into it is bringing oil up to the barges it means risking a serious setback. So it may be wiser to wait for the relief wells that are being drilled to get down to the point, 4,000 metres below the sea bed, where they will intersect the existing well. At that depth stopping the flow with a deadweight of drilling fluid could create few problems, once the exceedingly difficult challenge of hitting the well is met. So far, the first relief well is only about 1,000 metres or so below the sea bed, and the second has only just been started.

Underwater spraying by ROV -

Not all the remotely operated vehicles at the site have been involved in replumbing kill lines, hooking up manifolds and supporting the relief wells. Some have been swanning around spraying chemical dispersants into the oily waters. If the top kills do not work this spraying may also help limit the damage done by the oil before the relief wells are finished.

The investigation team’s work thus far shows that this accident was brought about by the failure of a number of processes, systems and equipment. There were multiple control mechanisms— procedures and equipment—in place that should have prevented this accident or reduced the impact of the spill: the investigation is focused on the following seven mechanisms.


1. The cement that seals the reservoir from the well;
2. The casing system, which seals the well bore;
3. The pressure tests to confirm the well is sealed;
4. The execution of procedures to detect and control hydrocarbons in the well, including the use of the BOP;
5. The BOP Emergency Disconnect System, which can be activated by pushing a button at multiple locations on the rig;
6. The automatic closure of the BOP after its connection is lost with the rig; and
7. Features in the BOP to allow Remotely Operated Vehicles (ROV) to close the BOP and thereby seal the well at the seabed after a blow out

The procedure was intended to stem the flow of oil and gas and ultimately kill the well by injecting heavy drilling fluids through the blow-out preventer on the seabed, down into the well.
Despite successfully pumping a total of over 30,000 barrels of heavy mud, in three attempts at rates of up to 80 barrels a minute, and deploying a wide range of different bridging materials, the operation did not overcome the flow from the well.
The Government, together with BP, have therefore decided to move to the next step in the subsea operations, the deployment of the Lower Marine Riser Package (LMRP) Cap Containment System.

The operational plan first involves cutting and then removing the damaged riser from the top of the failed Blow-Out Preventer (BOP) to leave a cleanly-cut pipe at the top of the BOP’s LMRP. The cap is designed to be connected to a riser from the Discoverer Enterprise drillship and placed over the LMRP with the intention of capturing most of the oil and gas flowing from the well. The LMRP cap is already on site and it is currently anticipated that it will be connected in about four days.

The Lower Marine Riser Package (LMRP) Cap :

 •Installing a Lower Marine Riser Package (LMRP) Cap is a containment option for collecting the flow of oil from the MC252 well. The LMRP is the top half of the blow out preventer (BOP) stack.

•The installation procedure first involves removing the damaged riser from the top of the BOP.

•A remote operated hydraulic shear will be used to make two initial cuts and then that section will be removed by crane. A diamond wire saw will then be placed to cut the pipe close to the LMRP and the final damaged piece of riser will be removed.

•The LMRP Cap is designed to seal on top of the riser stub. The seal will decrease the potential of inflow of seawater as well as improve the efficiency of oil recovery. Lines carrying methanol also are connected to the device to help stop hydrate formation.

•The device will be connected to a riser extending from the Discoverer Enterprise drillship.

•The LMRP Cap is on site, and it is anticipated that this option would be available for deployment by the end of May.

Clearing the oil slick :
Dispersants consist of surfactants (which are like detergents) in a solvent. When applied to a slick of oil they are meant to break it up into tiny droplets which disperse widely and are broken down by bacteria. The use of dispersants reduces the chances of direct exposure to oil by birds, fish, sea animals and everything ashore, but it may increase the risks for things on the sea floor in some circumstances. This is why they cannot be used everywhere. They are also toxic, though a lot less so than oil itself.

Spraying dispersants in new ways, rather than using new formulations, may make more of a difference. BP thinks spraying dispersants into the oil plume where it leaves the riser may be 20 times more effective than waiting until it reaches the surface. If so, the 45,000 gallons so far sprayed at depth may have done more good than all the spraying at the surface. Three trials of this technique have been made by the EPA ( Environment Protection Agency ), the first two being inconclusive due to logistical difficulties.

There will be plenty of lessons to learn from the Deepwater Horizon disaster. Once the leaks have been stopped, the operation may try to get the failed blowout preventer to the surface so that it is at last possible to see what really went wrong. It is not just the engineering response to future oil spills that will be affected, but also working practices, safety systems and regulation. The future safety of offshore drilling for both the roughnecks and the environment will be shaped by what happens a mile below. 

[ And also the subsequent legal proceedings, if every of those involved wishes to wash their hands and pointing to the culprit of the cause....... ]

EVERY oil spill has a silver lining—if you are a lawyer, that is. More than 70 related lawsuits were filed in the two weeks after oil started leaking into the Gulf of Mexico on April 20th, most of them class actions that claim damages on behalf of many similar victims. Trial lawyers are dreaming of one of the biggest paydays since they feasted on tobacco litigation. Even more certain are the bumper fees for law firms defending BP, Halliburton and other firms involved. The most notable winner is Kirkland & Ellis, which will represent the British oil giant.

No one doubts that the BP lawsuits will dwarf those that followed the Exxon Valdez spill in Alaska in 1989.

However, actual damages could run into billions, even before fees. Less comforting is the $75m cap on liability for economic damages under the Oil Pollution Act (OPA) of 1990. Regardless of what happens to efforts in Congress to raise this cap to $10 billion, this legislation may not constrain tort lawsuits under state or common law. The point of the OPA was not to limit tort law but to supplement it. Legal damages could thus be in addition to other compensation that is paid voluntarily to victims by BP and others, an amount that has been estimated at anything from $3 billion to $8 billion.

A crucial contest is looming between BP and the trial lawyers over the extent to which various lawsuits will be consolidated, and where the trial will happen. The trial lawyers fancy Louisiana, with its long history of generosity to class-action litigants; BP would prefer oil-friendly Texas.

Litigation over the oil spill is helping to reverse a downward trend in class-action suits against business. The BP case may be just the sort of disaster that tort law exists to address. But the justification is less clear for some other high-profile litigation.

Cleaning the oil spill and impact to the Gulf environment and wildlife :
030610 Oil Spill Impact

Never too old to learn more .....

“LIFELONG LEARNING” is a phrase very common this days and continuing what I posted before, some organizations  may not seem to treasure or adhere to the notion.  According to a recent survey in US, a management-development firm, the number of professionals taking part in formal corporate training drops rapidly after the age of 55. Are these old horns being overlooked or the younger ones being overly taken care of ??

It maybe tempting to conclude that older executives are "falling victim" to age discrimination, as firms focus resources on younger talent and letting them swim in the deep with expensive lesson being not quickly learnt as they could lack the foresight and most important, past experiences accrued over the years by these older staff and executives.

It seems conventional training simply no longer serves the needs of the older executives. Formal programmes are often seen as a repetition of lessons already learned and become increasingly irrelevant in the light of experience and expertise. Depending on what kind of training material and they must be specially tailored to fit the needs of the organization they run and ability to see the day-to-day business event and what are the problems facing them,etc..... The resulting repetitive and bored programme will tend to cause “training fatigue” and is resistant to most incentives.

This doesn’t mean that more seasoned executives have completely abandoned the idea of personal and career development. Instead some of these groups prefer a do-it-yourself approach, conducting their own research and swapping war stories with their peers rather than take a place at business school. Such self-taught approach carries some potential drawbacks. FIrstly is that a wealth of knowledge and experience is lost from the classroom, which reduces the value of the training for everyone else. But non-participation may also be the beginning of a process of detachment from the organisation, its aims and aspirations, which in time will damage both parties. Furthermore, as executives start to stretch their careers into their fifties or more, education makes even more sense for this group.

One solution is to throw money at the problem. When senior managers are offered the chance to mix with their peers at a top business school, rather than a bog-standard institution, they seem to be quickly won over. IMD  in Switzerland ( famous for its MBA school ), for example, maintains that it does not see any drop in the number of older managers on its programmes, and goes on to say that it has actually witnessed organisations investing heavily in them throughout the downturn.

Few organisations could afford to put all of their veteran managers through the sort of prestigious programmes which is costly. But firms do need to engage those managers below the C-suite—what one management consultant describes as the “magnificent middle”—because these are the front-liners who make things happen within any business and who carry around in their heads the secrets of how the organisation works.

One way in which this can be done is to make training less about abstract theory and more about the actual workplace. This means steering clear of the case studies that business schools are so fond of and instead relating new ideas directly to what is happening on a day-to-day basis within the organisation. To accomplish this, training should be delivered in short, sharp bursts so that executives can take a lesson, put it into practice, assess its effectiveness and then return to shape it further in light of this “trial by fire”.

Henry Mintzberg from McGill University in Canada, a high-profile champion of the middle manager, takes this approach one step further. He believes the best way to win over this group is to get them to train themselves. His “Coaching Ourselves” organisation brings experienced executives together for 90 minutes at a time. Managers are supplied with learning guides but not teachers. They discuss and reflect on how the topic impacts on them.  The managers  learn from each other and, most crucially, develop actions for their workplaces.”

Whatever approach an organisation takes to embrace its veterans, an ageing population means that it must do something, or else face the much more serious problem of how to replace them and their valuable knowledge in the near future. 

To be continued........ 

What could be learnt from Dr Goh's past ......?

Courage, optimism and "can-do" spirit :

When he became Finance Minister, he faced formidable challenges: widespread poverty, high unemployment, poor resource endowment, a small domestic market and industrial strife. In 1965, when Singapore was asked to leave Malaysia, Singapore lost its hinterland. In the face of such odds, Dr Goh never despaired. He had courage, optimism and a can-do spirit.
[ Keppel FELS has probably learnt from the word "Can-do" and by now it probably has rank second-to-none in rig building business world ! Maybe this is a bit of an overstatement ....:)

Most problems have solutions:

If we think hard enough, there are solutions to most problems. After Singapore exited Malaysia, he has made the world our hinterland. He swam against the tide by inviting multinational corporations to invest in Singapore. He made 'profit' a good word instead of a bad word. He created a pro-business environment which made Singapore stand out in the Third World.

Defy conventional wisdom:

We should think for ourselves and not be a slavish follower of conventional wisdom and fashionable theories.

For example, he was not afraid to deviate from Keynesian economics and the Western ideological bias against industrial policy. He would insist on thorough homework and he would study the experiences of others but, in the end, adopt a solution which fitted our circumstances and worked.

Build institutions:

He has built many new institutions. Most have endured and prospered. Many charismatic leaders of the Third World have made the mistake of using their charisma, instead of institutions, to get things done. He has made and left Singapore with a rich legacy of strong institutions.

Secure Singapore's prosperity and independence:

The people in government - both politicians and civil servants - must be focused, not on their personal agenda but on securing the prosperity of Singapore and protecting her sovereignty and independence. In many countries, both developed and developing, people aspire to public office in order to enrich themselves. He took up public office in Singapore just like joining a holy order.

Respect and help the poor :

One of the purposes of government is to make the world a little less unfair for the poor, the disabled and the disadvantaged. He started his professional life in the social welfare department and he represented Kreta Ayer, one of the poorest constituencies in Singapore, he never looked down upon or ignored the interests of the little people. Singapore's ruling elite respects and cares for its poorer citizens.

Ideas are important :

He respected scholarship, research and ideas. He founded the Institute of Southeast Asian Studies, the predecessor of the East Asia Institute of the National University of Singapore, and others. He was well-read and enjoyed meeting and picking the brains of scholars and thinkers.

Go beyond material things :

Dr Goh was a well-rounded individual. He loved music and founded the Singapore Symphony Orchestra. He created the Chinese and Japanese gardens in Jurong. He was also the founder of the Jurong BirdPark and the Zoo. The eighth lesson is that life is more than making money and eating well. It is also about learning to enjoy music, communing with nature and marvelling at the splendours of the bird and animal kingdoms.

Lead a simple and frugal life :

He is thrifty and is legendary. Even when he could well afford it, he continued to live a simple and frugal life. He shunned ostentation and consumerism. When he was at the Monetary Authority of Singapore, he apologised to visitor for the size of his office. I do not think he would approve of the trend in Singapore where some wealthy citizens flaunt their wealth and lead self-indulgent lives.  Not only the wealthy, also those youngsters nowadays sinking their pocket into condominiums, luxury items, like cars, club memberships,etc and some of the riches may have forgotten to take some portion of their wealth and share them with the less fortunate and charitable organisations.

Never stop being curious :

The last lesson is that one should always be curious and never stop thinking of new ideas. Dr Goh's interests spanned an incredible spectrum. He had a child-like curiosity about the world and an unquenchable thirst for knowledge. [ There are lots of thing to learn, especially in our kind of business of rig designing and building. The more knowledge and lesson learnts from the industry and institutions, the better you are in working out a solution to the day to day problem, be it design, commissioning, production,etc. ]

Top Competitiveness Nation - Singapore

SINGAPORE ahead of Hong Kong and the United States to snatch the top spot in global ranking of economic competitiveness. The Republic edged ahead of its rivals to assume pole position for the first time in what the compiler of the annual rankings, Swiss business school IMD, is calling a photo finish.

The gap between the three in this latest assessment of the world's economies - which places Hong Kong second and the US third - is less than 1 per cent. This is nothing surprising that Singapore has come to grab this title and if you look at the political stability aspect and what is currently happening around the neighbouring regions like Thailand, political instability affects the nation's business and foreign investors will move away from countries eventually if the MNCs are not in the comfort zone. It will affect the MNCs bottom line and it is not in their business plan to take on such risk to invest in places that leave uncertainty in their day to day operations. 

This year's rankings are an upset to what has become the traditional pecking order and mark the first time since 1994 that the US has failed to trounce the competition. For most of the 1990s and early 2000s Singapore has ranked second, but in recent years it has alternated with Hong Kong for second and third place.

IMD said Singapore and Hong Kong 'displayed great resilience through the crisis... and are now taking full advantage of strong expansion in the surrounding Asian region'. It was particularly impressed with Singapore's 13 per cent growth in the first quarter of this year.

While 'it's a tango between Hong Kong and Singapore at the top' of the rankings, Singapore's ability to utilise its competitive advantages and improve on its weaknesses was what gave it the edge over Hong Kong this year, according to Ms Suzanne Rosselet-McCauley, deputy director of the IMD World Competitiveness Centre.

Business chambers and associations believe Singapore's clinching of the elusive top spot could be partly down to the Government's swift and business-friendly response to the downturn last year.

British Chamber of Commerce president Steve Puckett said: 'The handling of the financial crisis here was exemplary and a model example of what planning, good sense and cooperation can achieve.'

Singapore International Chamber of Commerce agreed: 'During the downturn, the Government stepped in with very effective programmes that enabled companies here to retain their skilled people and send them on to learn new things during the slow time of the recession.'

Another key factor contributing to Singapore's triumph is thought to be the loss of competitiveness in the US relative to other countries.

The study suggests that developed economies are all suffering from a 'debt curse' of soaring budget deficits, which, in the worst case of Japan, will take up to 2084 to pay off.

For most of the 20 criteria used to draw up the rankings, Singapore appeared in the top 10. But it was placed 22nd in terms of economic indicators - which include the economy's percentage share of global gross domestic product (GDP) - and fared poorly in prices, coming 47th out of the 58 economies ranked.

The cost of living and doing business here remains a cause for concern for business chambers.

Citigroup economist said recent policy moves that effectively raise labour costs may weigh on Singapore's cost competitiveness in the short term, until the drive for higher productivity catches up.

Coming Out Tops

Finance for kids and adults ??

Prof Emeritus Lewis Mandell is in Singapore until next week. He teaches Economics for Managers in the UB (University at Buffalo) Executive MBA programme, which is offered in partnership with the Singapore Institute of Management.

Professor Mandell, who has researched financial literacy issues in the last 15 years, says teaching financial literacy to kids doesn't work. Financial literacy is defined as the ability to make important financial decisions for one's own benefit.

'I'm very pessimistic. I have been doing research continuously, tracking levels of financial literacy which have not gotten any better, and also attempting to measure the impact of educational programmes. The research gives no reason for optimism. It basically shows that students in high school who have had a course in financial education are no more financially literate than those who never had such a course. That's an indication that we have not figured out how to teach financial literacy.'

Since the financial crisis, regulators have been grappling with how the sale of investment products should be tightened particularly when investors are relatively financially unsophisticated. In Singapore, the Monetary Authority of Singapore has proposed a test to ascertain investors' knowledge before they can invest.

Prof Mandell says financial illiteracy takes a heavy toll on individuals and society. '(Mistakes) aggregate. They were not the sole factor in the meltdown but they were an important factor. If everyone makes a bad decision it can have a bad effect on the whole society. Is it possible to educate people to the extent that they will not make such mistakes? It does not appear to be possible.'

There are, however, ways to raise the chances that children will absorb sound personal finance principles. One way is to allow them real experience with money - with adult guidance.

Prof Mandell himself was allowed by his parents to invest his college education savings. 'When I was 13, my parents said - you have some money and you have an interest in the market. They called my broker, who was a cousin and told him to let me trade my own account. That was before there was online trading. So I'd call him and he'd invest. That helped me develop a great interest in finance.'

His daughter, he recounts, came home one day when she was 12, and said she wanted to invest in Pepsi instead of Southwest Airlines which was then a fast growing stock. 'She said - 'I think (Southwest) is boring. My friends and I all like the commercials for Pepsi. I want to invest all my money in Pepsi'.'

Prof Mandell told her to call the broker and to go ahead with whatever was jointly decided. 'The broker said - rather than invest all your money in Pepsi, let's invest half in Pepsi and half in Southwest.

'Pepsi fell. She lost some money but she learnt something extremely valuable. To this day she's very good at personal finance. She has a very good understanding that no matter how much you like a stock, it doesn't mean it will go up.

'I believe that it is useful to get children involved in their own finances to give them a degree of control with adult supervision. If they realise they are spending and investing their own money, they'll be much more serious about it than if it was a game.'

Children, he adds, should also be able to open their own savings accounts and have control over their spending. In Singapore, child accounts are typically jointly opened with a parent. Banks such as OCBC, however, do allow accounts solely in the child's name, from as young as five years old. Yet another avenue is to allow a child to have a supplementary credit card with limits on spending. This, he says, will teach the child to spend responsibly within a budget. Supplementary cards, however, can only be issued to a child of at least 18.

'I believe strongly in child accounts. I believe that a child should at a very early age have an account in his or her name, and that the parent should encourage the child to get into a behaviour of saving . . . If a parent can take money out of the account it doesn't give the child identification with those assets.'

Research on the effect of allowances on children yield startling results. There are generally three types of allowances, he says. One is a regular allowance. A second form is an allowance as a form of reward, for doing chores, for instance. A third is not to give a regular allowance, but to give money when the child asks for it.

'It turns out that children who get a regular allowance have the lowest financial literacy. Columnists are well meaning and often argue that an allowance teaches responsibility but it's the opposite. The ones who do best are those who get an allowance for doing chores or meeting expectations. They're followed closely by those who don't get a regular allowance but who ask for money.

'My reasoning is that children who get a regular allowance - it's like being on welfare. You're not reinforcing good habits. You're saying that regardless of how good or bad you are, I'm giving you this amount, and it doesn't tend to teach responsibility.'

Prof Mandell has been working on a proposal as part of the Obama administration's efforts to address the need for an 'automatic' retirement savings option that is safe and simple. His proposal, dubbed RS + (Real Savings +) is a portfolio that aims to provide capital and inflation protection with some upside from equities.

The default option in most US retirement plans is a target date fund where the asset allocation shifts to a more conservative profile as a worker nears retirement. But such funds came under fierce criticism in the crisis as their fairly heavy equity weightings caused severe losses.

Prof Mandell's portfolio would invest a portion in Treasury Inflated Protected Securities, at an allocation that would deliver the principal on an inflation adjusted basis at retirement. The balance is to be invested in equities through low cost index funds. 'My idea is to use financial engineering to develop products that are not going to make rich people richer, but to make ordinary people safer. They may use derivatives but to benefit the ordinary person rather than the financial institution.'

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We all need to invest early and start the day you start your first job ! !

We all dream of having a golden retirement - to indulge in new hobbies, travel and spend time with family. Whether you want to retire comfortably or lead just a simple lifestyle, you should take retirement planning early and seriously. You have to manage the transition from an employment income to an alternative stream of income - from savings or investments - to support your retirement period.

The time spent in retirement will rise with increasing life expectancy, so planning will also include managing longevity and inflation risks.

Start early :

There are times when retirement is forced upon individuals. By planning ahead, you ensure you are ready when it happens. Ideally, the best time to start planning is the moment you start work. When you have time to build your nest egg, you do not have to play catch-up. You do not have to take a higher investment risk to meet your retirement goal.

Points to remember :

Getting started early (regardless of the amount) is a means of forcing you to be disciplined. If you are 40, you are 264 pay cheques away from retirement, assuming you work till 62. If you put aside $1,000 per pay cheque, you will have a nest egg of $264,000. If you were to invest it at 4 per cent per annum, this amount will grow to $423,620.

Key factors that you should keep in mind include aiming to pay off your loans, such as mortgages, before you stop work. Also, educate yourself and be familiar with the financial world to help you get started. Ensure also that you have sufficient protection plans as medical costs are likely to increase as you age. Do not over commit on loans or spend on wants ( needs is important, not wants ), eg. car, club membership,etc which you do not really got to have them in life.......

Buy health protection plans, such as hospitalisation and surgical plans, critical illness and long-term care, when you are young and healthy to keep costs low.

Government schemes :

First, you can start with your Central Provident Fund (CPF) savings to build your retirement portfolio.  CPF members aged 55 from year 2013 (with at least $40,000 savings in their retirement account with the CPF Board) will automatically be enrolled in the national annuity scheme, CPF Life.  They can look forward to a stream of annuity income from age 65 for life.

Most are familiar with CPF savings but overlook another critical source of funds - the Supplementary Retirement Scheme (SRS).  For those who pay income taxes, SRS can be an excellent tax-deferral scheme. Each dollar of contribution to the scheme will reduce your taxable income by the same amount.

Individuals can leverage on this scheme to build a stream of retirement income. You can plan it such that your SRS drawdown starts at age 62 before your CPF Life Plan payment begins. You must complete your withdrawals in 10 years.

Alternative income streams :

Using cash savings and investments to build your retirement nest egg is another way.

A well-diversified retirement portfolio, consisting of investments in equities, bonds and commodities as well as fixed deposit savings, will provide staggered income streams. The proportion you place in each asset class will depend on the investment risk you are willing to take.

Having an annuity in your retirement portfolio is prudent because it would pay you an income as long as you live. You may want to supplement CPF Life payouts with annuity products to hedge against inflation.

With this, you do not have to worry about how long you live. The annuity products can be structured in your portfolio to cover your basic lifestyle expenses from age 65.

Guard your nest egg :

Don't be complacent about monitoring your retirement plan. Ensure that you monitor it - once a year, at least - as your investment risk appetite may fall or change over time.