Company Briefs - 12 Jul 2007

Keppel clinches $150m contract to equip drillship

KEPPEL Shipyard, a subsidiary of mainboard-listed Keppel Corporation, has clinched a $150 million contract to install equipment on a new drillship now being built in China for an undisclosed customer.

This is the first outfitting work on a drillship secured this year by Keppel, the world's largest builder of offshore rigs. It adds to its order book of $11 billion.

This year alone Keppel has secured orders worth $3.5 billion, less than the $4.5 billion worth of orders won by SembCorp Marine, the global number two in offshore rigs.

Keppel's order book comprises 28 jack-ups (including three N-class jack-ups) and 13 semisubmersibles (of which 10 are for drilling, two production and a floatel).

Between them the two companies have secured orders for 70 per cent of the world's jack-ups and more than 40 per cent of semis.

The drillship is due to arrive at Keppel Shipyard in the third quarter of next year. Installation of the equipment is expected to be completed by the fourth quarter of 2009.

The shipyard's executive director, Nelson Yeo, said: 'This new contract brings to fore the group's project management expertise and capabilities in converting and integrating offshore exploration and production vessels.'

Mr Yeo pointed out that owners can now choose to outsource the construction of bare hull at yards elsewhere. 'This can be beneficial to us because our valuable fabrication capacity can be made available to carry out other value-added work,' he said.

Keppel's workscope includes installation, integration and completion of the owner-supplied power generation, thrusters and drilling equipment packages on a new hull. The new drillship is designed to operate in deep water - 12,000 feet.

Demand for drillships is expected to go up as the search for oil expands into deeper waters. At present, there are fewer than 40 drillships worldwide, less than 6 per cent of the total offshore rigs in operation.

Last year, another 10 were on order at shipyards round the world. This amounted to 15 per cent of new orders.

According to investment bank JPMorgan, demand for both deep-water drilling and production requirements will take centre stage over the next few years, with 70 per cent of semis now being built having already secured back-to-back drilling contracts, some stretching possibly to 2026.

It feels there will be a potential shortage of semis beyond 2010. 'This anticipated tightening in supply is also reflected in the global semis order book which has jumped three times from just 13 semis in late 2005 to 40 semis.'

Cosco unit wins US$563m new orders

COSCO Corporation says its unit Cosco Shipyard Group has won five new contracts worth a total of US$563 million (S$853 million).

Cosco Shipyard Group, 51 per cent owned by Cosco Corp, secured the shipbuilding and VLCC (Very Large Crude Carrier) to VLOC (Very Large Ore Carrier) conversion contracts from international customers.

Four of the deals are for VLCC conversions, worth a total of US$250 million. The other deal, worth US$313 million, is for eight bulk carriers.

'Many of our contracts have been sealed with world-renowned global industry players,' said Cosco's vice-chairman and president Ji Hai Sheng.

'As we advance our shipyard competencies and enlarge our marine engineering base to include a wide range of high-value work such as rig-building, ship-building and VLCC conversions, we are pleased with the substantial progress made in diversifying our customer base of world-class corporations.'

Each VLCC conversion is expected to take between 160 and 180 days. Progressive deliveries are expected by the third quarter of 2008. The bulk carriers are scheduled for progressive delivery from May 2009 to March 2010. The projects, all due to begin this year, will be carried out at Cosco's shipyards in Zhoushan, Dalian and Nantong in China.

Cosco said the contracts are not expected to have a significant impact on its net tangible assets or earnings per share for the year ending Dec 31, 2007. Cosco shares finished up 26 cents at $4.64 yesterday.

Cosco is a diversified group with core activities in shipping and shipping-related services. It is the listed subsidiary of China's biggest shipping group, China Ocean Shipping (Group) Company.

Hyflux to build used-oil recycling plant in S Arabia

HYFLUX'S water-recycling technology has proven useful not just in winning water projects in the Middle East. The Singapore company's advanced membrane system is also versatile enough to help it break into the oil business in the Arab world.

Thanks to International Enterprise (IE) Singapore, the Singapore government agency pushing Singapore companies to go international, Hyflux has been brought in to build and own a used-oil recycling plant in Jeddah, Saudi Arabia.

'This will be the first membrane-based oil-recycling plant in Saudi Arabia and will collect used oil from the power, petrochemical, marine and automotive industries,' says Michelle Tan, head of environmental services at IE Singapore. 'Using the Hyflux advanced membrane system, the plant will treat and recover the used oil to produce high-grade oil.'

Hyflux will co-invest $45 million with the Saudi Economic Development Company (Sedco) and Lube Oil Refining Company to build the plant in two phases over the next three years.

Phase1 of the plant, which will have 24,000 tonnes per year (TPA) processing capacity, is scheduled to be completed in the first half of next year. The plant's capacity is expected to double to 48,000 TPA when Phase2 is completed.

'IE Singapore has introduced Sedco, which was searching for a co-investor, to Hyflux,' Ms Tan says of the agency's role in the project. 'Sedco was looking for a company which is familiar with used lube oil collection, oil recycling, distribution and sales of the recovered base oil to co-

invest in an oil-recycling plant in Saudi Arabia. Hyflux, which has developed its proprietary membrane system, is keen to participate in this project.'

The spike in oil prices and acute lube oil shortage in the Arab world have offered a golden opportunity for recycling used oil.

'World demand for high-grade lube oil is increasing as economies like China and India continue to grow rapidly,' Ms Tan notes. This has resulted in a shortage of base oil. The situation has also been aggravated by the shutdown of several base oil refineries globally.

'The scarcity of base oil has driven up oil prices every single year for the last four years,' Ms Tan says. 'Never has the oil-refining industry had a more positive and lucrative operation than in the past few years.'

Being one of the largest consumers of lubricants worldwide, Saudi Arabia is obviously a large market to move into.