Sembmarine's Jurong Shipyard wins US$696m contract

Singapore

JURONG Shipyard, a wholly owned subsidiary of Sembcorp Marine (Sembmarine), has won a US$696 million deal to convert a shuttle tanker into a floating, production, storage and offloading (FPSO) vessel for OOGTK Libra GmbH & Co KG - a joint venture between Brazil's Odebrecht Oil & Gas and Teekay Offshore.

This conversion includes detailed engineering, installation and integration of topside modules, installation of external turret and power generation, accommodation upgrading as well as extensive piping and electrical cabling works, Sembmarine said on Monday.

"We are pleased that Odebrecht Oil & Gas and Teekay have chosen Jurong Shipyard as their strategic partner. The conversion work will be done at our Sembmarine Integrated Yard @ Tuas which will soon commence work on its first FPSO conversion project," William Gu, general manager of Jurong Shipyard's Offshore Division, said in a statement on Monday.

The FPSO is scheduled for completion in the third quarter of 2016 and will have the capacity to produce 50,000 barrels of oil a day and four million cubic metres of natural gas a day.

It is expected to be chartered to Petrobras for work on the Libra field in the ultra-deepwater section of Brazil's Santos Basin. Petrobras had nominated Teekay Offshore and Odebrecht Oil & Gas's joint venture as the lead commercial bidder on the Libra project.

Operating as an early well-test unit, the FPSO will be on a 12-year charter once it begins its contract in late-2016.

A note on Monday by OCBC Investment Research's Low Pei Han said: "Brazil has been a major driving force behind FPSO demand and (Sembmarine) is well-positioned to service this segment." Ms Low maintained her "buy" rating on Sembmarine, with a fair value estimate of S$4.18.

This deal brings the value of Sembmarine's new contracts that have been secured year-to-date to S$3.7 billion. It is not expected to have any material impact on Sembmarine's net tangible assets and earnings per share for the year ending Dec 31, 2014.

Sembmarine's latest contract win follows an earlier one by its wholly owned subsidiary Sembawang Shipyard in July, worth about S$600 million. The deal had been for the conversion of two very large crude carriers into turret-moored FPSOs for Saipem SA, France. These vessels are meant for the Kaombo project in offshore Angola, about 150 km from the coast.

Sembmarine's counter closed two Singapore cents lower at S$3.64 on Monday.