Thursday, March 27, 2014
Yard expansion appears to be high on the business agenda for a few offshore companies in Singapore, including Sembcorp Marine Ltd., one of the country’s biggest two players in the sector, as they equipped themselves to tap a larger slice of business opportunities in Asia and beyond.
The expansion seems timely as the global oil and gas industry is expected to boost capital expenditure on exploration and production (E&P) this year to $723 billion, 6.1 percent higher than last year’s $682 billion, Barclay Banks said in a Dec. 9, 2013 equity research report.
HIGHER ASIA E&P SPENDING
Oil and gas E&P expenditure in Asia is likely to track the global spending, albeit at a slower rate of 2.47 percent in 2014, the Barclays report indicated. Countries in the region are projected to spend around $124 billion, compared to $121 billion in 2013. The E&P estimates were derived from Barclays’ data as well as its research on firms like PetroChina Company Ltd., China Petroleum & Chemical Corp. (Sinopec), China National Offshore Oil Corp. (CNOOC), Petroliam Nasional Berhad (Petronas), Oil and Natural gas Corporation Ltd. (ONGC) and others.
In Southeast Asia, Malaysia and Indonesia – two major petroleum producers in the region – are expected to invest more in the E&P sector. They are likely to have the “greatest forecasted investment in oil and gas, due to increasing urgency of stemming production declines. Both countries are developing shallow water plays, while also moving to deepwaters,” OCBC Investment Research said in a report highlighted in Singapore’s Business Times.
EMS ENERGY PINS GROWTH ON EXTRA YARD SPACE
EMS Energy Ltd., a local engineering solutions provider for the marine, oil and gas industries, inked a tenancy agreement with Singapore’s national developer of industrial infrastructure JTC Corp. (JTC) last month to lease around 5.74 acres (23,238 square meters) of land, including a 347.7-foot (106-meter) waterfront, in Tuas, which is located in western part of the island.
The firm will built in phases a new $18.7 million (SGD 23.6 million) waterfront facility, five times larger than its existing premises – which the company will dispose of when construction at the new location is completed – on the new site for offshore and marine activities.
“The first phase of the new facility will be completed in 12 months … [EMS will now have a] quayside for loading and unloading … [and] a fabrication yard,” EMS Energy CEO Ting Teck Jin told Rigzone in a phone interview.
When construction of the new waterfront facility is completed in the second half of 2015, the firm can “embark on larger projects and increase its capabilities and productivity,” EMS said in a Feb. 20 press release.
It plans to house functions such as painting, blasting and machining, which is currently sub-contracted, at its new yard in Tuas, which will help the company reduce production facilities rental and logistics costs. As such, the additional yard space in Tuas is crucial for EMS’s business growth as the firm will now be equipped to bid for larger projects, which is important as “margins are better for bigger products,” Ting highlighted.
The Singapore-based EMS, which supplies drilling systems, offshore cranes, mechanical load handling systems, deck machineries as well as contract manufacturing and custom fabrication, is actively scouting for business opportunities for the new facility.
“We are already seeking new business to utilize the space in the new yard … [and] yes we are widening our customer base to China, Indonesia and the region,” Ting revealed.
SWIBER ALSO BOOSTS YARD CAPACITY
Like EMS, another Singapore-based company Swiber Holdings Ltd., which provides integrated construction and support services to the global offshore oil and gas industry, was granted extra yard space at Tuas Crescent by JTC.
Swiber will merge the newly acquired land with an existing shipyard located next door owned by its wholly-owned unit Newcruz Shipbuilding & Engineering Pte Ltd. to create a comprehensive marine support base for the company’s offshore construction activities.
“This additional lease … will provide the necessary infrastructure to meet increased demands for in‐house auxiliary shipyard services; achieving seamless vertical integration for the Group and creating the competitive advantage for Swiber in the offshore oil and gas industry,” the firm’s group CEO and president Francis Wong commented in a Feb. 11 press release.
The combined yard, with a waterfront of 721 feet (220 meters), will occupy a total area of around 8.9 acres. The additional yard space will extend the repair and conversion facilities for Swiber’s fleet of vessels as well as expand its offshore fabrication capacity to include structures with mass of up to 300 tons. Swiber’s subsidiary Newcruz provides ship repairs, ship maintenance services, shipbuilding services, operations and maintenance.
The additional yard capacity would support Swiber’s goal of capturing a bigger share of business opportunities that exist in Southeast Asia’s oil and gas E&P sector. Growth opportunities exist as most tender rigs in the region – especially in Malaysia and Thailand – are aging, while around 1,680 shallow water platforms requires servicing, the company pointed out, citing data from Credit Suisse’s Asia Offshore and Marine Sector Outlook 2014.
Southeast Asia’s oil and gas services market featured prominently in the last financial year for Swiber, with the region’s share of the company’s total revenue rising to 73.7 percent or $780.8 million, up from 46.7 percent in 2012.
“The South East Asian market … remains strong, given expected accelerated oil and gas exploration to boost domestic oil production in this region,” Wong said in the press release announcing Swiber’s 2013 financial results.
SEMBCORP MARINE OPERATES A NEW YARD
Compared to the fairly recent moves by the two smaller offshore firms – EMS and Swiber – to add yard capacity, local industry giant Sembcorp Marine had formally opened a new integrated shipyard at Tuas View Extension in early November, with the occasion attended by Singapore Prime Minister Lee Hsien Loong.
Sembmarine Integrated Yard @Tuas will develop facilities at the 509-acre yard in three phases, with the 181.1-acre Phase I operational since August 2013. The yard will serve a wide range of vessels and rigs, including liquefied natural gas (LNG) carriers.
The yard is a “key thrust of Sembcorp Marine’s strategy to further strengthen its home base operations in Singapore to anchor the Group for long-term sustainable growth and expansion of its marine and offshore business,” according to the firm’s Nov. 6, 2013 press statement.
Phase I of the new yard includes a drydock (YST D2) measuring around 1,181 feet long, 292 feet wide and a draft of 28 feet. The YST D2, the widest drydock in Singapore, is designed to accommodate jackups and semisubmersibles.
Another drydock in YST D3, 1,352 feet in length and 217 feet in width with a draft of 36 feet, is the longest and deepest ship repair drydock in Asia. The YST D3 drydock has a special reinforced load-out area for offshore platforms of up to 20,000 tons, while its natural deepwater allows direct installation of thrusters for semisubmersible without having to tow the rig to sea, resulting in cost savings for customers.
Furthermore, Sembcorp Marine’s yard is configured with three finger piers and a basin ranging from 659 feet to 1,312 feet with maximum draft from 30 feet to 49 feet, allowing ultra-deepwater semisubmersibles to be berthed without restrictions in the new yard.
The new yard “will further maximize work efficiency and operational synergy, enabling us to utilize our workforce and resources to achieve higher productivity and faster turnaround,” Wong Weng Sun, president & CEO of Sembcorp Marine said in the release.
Meanwhile, Phase II of the new yard, occupying 85.3 acres and located adjacent to and north of the Phase I development, will commence operations around 2016 or 2017.
Compared to larger countries, yard expansion is a delicate matter in Singapore due to space constraint. JTC, as the country’s national industrial landlord, has to balance demand for land from businesses, including offshore firms, with other developmental needs in the country.
“JTC welcomes and encourages offshore industry players to expand their operations in Singapore to serve the global market. JTC will review each company’s request for additional land or space to assess how JTC can best support their needs,” JTC replied in an email to Rigzone.
Given land constraint in tiny Singapore, yard expansion is perhaps not a sustainable solution for local offshore companies seeking to grow their business in the long run. They are therefore strongly encourage to “adopt more productive technologies and production processes so that they will remain competitive and are able to optimize their production assets in Singapore,” JTC added.
Additional yard capacity provides these Singapore offshore firms with the basis to take on larger projects to expand their businesses in the global E&P industry. However yard space is only one aspect of the equation as these companies must work continuously to ensure that they have the capability to provide the appropriate offshore services demanded by the oil and gas industry.
Cheang has covered the upstream and downstream sectors of the oil and gas industry for over a decade. Email Cheang at email@example.com.