KUCHING: The smaller portion of the contract to build over US$1 billion Bergading central processing platform (CPP) in the North Malay basin gas and condensate development may be awarded to a local player.
Quoting Upstream, AmResearch Sdn Bhd (AmResearch) noted that the turnkey contract to build the Bergading CPP in the North Malay basin gas and condensate development has been awarded by US independent Hess to Hyundai Heavy Industries (Hyundai) and its engineering partner Aker Solutions (Aker).
AmResearch highlighted that a smaller portion of this contract may be awarded to Malaysia Marine & Heavy Engineering Holdings Bhd (MMHE), in order to meet local content requirements.
“Also, a multi-wellhead platform contract related to this development has also been awarded to SapuraKencana Petroleum Bhd (SapuraKencana) following the approval from Malaysia’s Petroleum Management unit,” it added.
AmResearch noted that Hyundai and Aker had already started work earlier this week on the contracted engineering, procurement, construction, installation and commissioning work on this CPP as well as a wellhead structure.
“The CPP involves a topside weighing over 20,000 tonnes which will be installed via a float-over loading procedure onto an 8,000-tonne jacket.
“Hyundai and Aker are said to have been in talks with Dockwise and Cosco Shipping for the float-over installation, which is scheduled to take place in early 2016,” it observed.
The research house added that the CPP jacket and the wellhead platform jackets, potentially worth up to RM600 million, will be sub-contracted to a yard in Malaysia.
Generally, it opined that this award highlights the increasing level of completion between local and foreign yards, which have a much stronger established track record, as well as Petroliam Nasional Bhd’s (Petronas) efforts to contain escalating cost pressures.
“Currently, only MMHE together with a foreign joint-venture partner has been awarded a CPP contract and more complex engineering projects for deepwater and enhanced oil recovery developments.
“The other two local integrated engineering, procurement, construction, installation and commissioning (EPCIC) providers – SapuraKencana and TH Heavy Engineering, have only secured smaller wellhead platform projects or jackets/parts of more complex designs,” the research house pointed out.
Besides this (North Malay basin) project and the scaling down of the Semarang field development, the research house opined that there are still multiple EOR projects in the pipeline.
Other CPP projects that remain on the cards are the Bardegg2-Baronia, Sepat, Kasawari and Guntong fields.
Quoting industry publication Upstream, the research arm of CIMB Investment Bank Bhd (CIMB Research) noted that SapuraKencana and Italy-based Saipem were among the bidders in Petronas’ tender call for a CPP under the integrated Bardegg 2 and Baronia enhanced oil recovery project off the coast of Malaysia.
It further pointed out that the companies are bidding against five others including Abu Dhabi-based National Petroleum Construction Company, a joint venture (JV) between MMHE and France-based Technip, a JV between China’s Offshore Oil Engineering Company and UK-based Petrofac, US-based McDermott, and South Korea’s Hyundai.
“The contract could be awarded in the third quarter of 2014 (3Q14) at the latest, with the delivery of the CPP targeted for early 2017,” it projected.
All in, together with the construction of the Refinery and Petrochemical Integrated Development (RAPID) in Pengerang, Johor, AmResearch expects the upward re-rating cycle for the sector to remain intact, as the flow of new orders for Malaysian players have risen by 37 per cent year-on-year (y-o-y) in 1Q14.
Hence, the research house maintained its ‘overweight’ call on the oil and gas (O&G) sector with our ‘buy’ calls for SapuraKencana, MMHE, Bumi Armada Bhd, Yinson Holdings Bhd and Alam Maritim Resources Bhd.
“Our ‘hold’ recommendations are for Petronas Gas Bhd and Dialog Group Bhd,” it added.
As for CIMB Research, it looks forward to the announcement of the contract winner given the slowdown in sizeable fabrication contract awards over the past one year.
Overall, it advised that investors should stay invested and watch out for positive news flow, adding that Petronas’s capital expenditure (capex) is expected to keep the excitement going for the local service providers.
“The sector remains an ‘overweight’, with the strong contract pipeline arising from Petronas’s capex as the main potential catalyst.
“Our top picks are SapuraKencana among the big caps and Perisai Petroleum Teknologi Bhd among the small caps,” the research arm said.