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THE downturn in the offshore marine sector is not stopping Rotating Offshore Solutions (ROS) from pushing the envelope by going after larger projects along with its intention to progress up the value chain.
Set up in 2004, ROS began by taking on contracts valued at millions of dollars for the provision of engineering and design services and module fabrication to the upstream oil and gas sector.
Over the past decade, ROS has acquired a track record with industry bigwigs including Modec and BW Offshore as well as supermajors such as Total and Shell, delivering modules and packages for fixed and floating production structures that have been deployed across a wide geography spanning South-east Asia, the Middle East, West Africa and the North Sea.
Having established its track record with the key industry players, ROS subsequently set out to enlarge its role by taking on turnkey upstream projects. These contracts, typically ranging in the tens of millions of dollars, called for engineering, procurement and construction (EPC) of offshore production structures.
ROS has completed the EPC for the conversion of a mobile offshore production unit (MOPU), as reported in The Business Times in November 2014. A company executive told BT then that the aim was to expand into EPC for "more diverse and larger oil and gas process modules and facilities", including the complete topsides of floating production, storage and offloading vessels.
That comment was made in the early months of a sharp fall in oil prices, which recently traded in the US$40-US$60 band - about half the more than US$100 average during the first half of 2014.
Some supermajors had already signalled their intent to cut exploration and production budgets before the oil price collapse, but a persistent lack of visibility in its recovery led to more drastic reductions in capital and operational expenditures.
Against this unfavourable macroenvironment, ROS managing director Chia Kuan Wee says that the relatively young startup is not backing down from its growth plan. Instead, ROS still wants to raise the ante by graduating to larger-bracket contracts that cross the S$100 million mark.
This may sound ludicrous in an industry rife with talk of down-sizing and cost-cutting. But this is where, in Mr Chia's view, being registered as a private limited company instead of a public-listed entity makes a difference. The shareholders and management behind ROS are all aligned with a common vision to grow the company, according to Mr Chia.
With just 350 employees on hire, ROS is small but nimble compared to some multinational oilfield services companies with thousands of employees and encumbered by a much higher cost base.
ROS also takes comfort from going after niche segments that see less competition. "It is a lot easier to command loyalty from clients when there are not many vendors chasing after the same projects," Mr Chia says. For this reason, he prefers not to disclose specifically which segments ROS now goes after, instead broadly describing its present focus as "fast-track production units".
Demand for these fast-track solutions is fuelled by a necessity confronting oil companies to maintain output despite the low oil price environment.
This puts pressure on contractors to think out-of-the-box in coming up with highly customised but cost-effective solutions. This is a challenge in which ROS stands a chance of triumphing over its much larger rivals as it has the flexibility of operating from a more competitive cost base as a result of its lower overheads.
ROS also enjoys a key advantage from having elected to operate from Singapore. Here in the home country of Mr Chia, spare parts, valves, steel plates and other equipment and materials are available in all shapes and sizes as a result of the thriving offshore marine supply chain that has developed roots in the island nation. This puts ROS in a better position to tailor equipment packages to end-clients' specifications and budget requirements.
ROS has elected to lease a two-hectare waterfront yard at JTC's Offshore Marine Centre, where fabrication and assembly of modules can be carried out.
ROS has also established relationships with vendors and bankers, which it relies on for support to execute projects. Mr Chia notes that ROS also enjoys the flexibility to turn to bank borrowings given its relatively lower gearing ratio.
Besides debt financing, ROS is set to receive further capital injection with Singapore- listed Ezion Holdings announcing in July the subscription of over 300,000 shares for a consideration of S$18 million. Ezion's interest will constitute 30 per cent of ROS' enlarged share capital.
Ezion is a seasoned liftboat and accommodation jack-up rig operator. In its July disclosure to the Singapore Exchange, Ezion said that the alliance with ROS is expected to expand the customer bases of both companies.
Besides Ezion, ROS also has close ties with Keppel Shipyard, to which, BT understands, the younger startup can turn for additional capacity required to deliver EPC projects.
"Oil and gas is a sector that creates opportunities for locals - the value creation is very high but it also requires a lot of hard work," says Mr Chia.
ADAPTING TO NEW OPPORTUNITIES
Of the headwinds confronting oilfield services providers active in the upstream space, Mr Chia says: "In business, there are always ups and downs - you have to maintain reserves during upswings and work harder and innovate to adapt to new opportunities during downturns."
He acknowledges, though, that this is often easier said than done.
ROS is understood to have delivered two fast-track production units to oil companies operating in Indonesia and Malaysia. The contracts were delivered amid oil companies unveiling up to 50 per cent capital expenditure cuts in the two South-east Asian hydrocarbon- producing countries.
But as the chief executive of Malaysia's Petronas, Wan Zulkiflee Wan Ariffin, signalled at a June 2015 industry event, oil companies have to invest in new ways of doing business to improve productivity and eliminate inefficiency to tide over the current downturn.
Since his comment in June, Petronas has held back on final investment decisions on several large new field developments including the Kasawari gas project off Sarawak. Instead, the Malaysian national oil company has pushed on with the sanction of the D18 project involving injecting water and gas through a MOPU to boost output from the existing field, Malaysian media reported.
Petronas has awarded two contracts tied to D18, the first involving the lease and provision of a MOPU to home-grown oilfield services contractor, Uzma, and the second for the supply and installation of flexible lines connected to the offshore production structure - this went to French contracting giant Technip.
Petronas has also flagged its intention to begin a pilot sour gas field development off Sarawak using a MOPU.