-  Upstream reported that Petroliam Nasional (Petronas) has formally approached the market for up to 5 multi-year Pan-Malaysian umbrella contracts to undertake transportation and installation of pipelines and offshore platforms across multiple production sharing contracts. As with the previous tender in 2009, Petronas has split the projected work volume across as many as 11 production sharing contracts into five packages — A, B, C, D and E.

-  Recall that the 5 packages on offer in the 2009 round were merged into four contracts and subsequently awarded to two Malaysian players — three went to SapuraKencana Petroleum (SapuraKencana) and one to GOM Offshore. These contracts expire by the end of 2013. Each of the five contracts on offer under the Pan Malaysia transportation and installation tender in 2013 is expected to run for three years from the end of the year, plus an option to extend for another year.

-  Under the 2013 tender, packages A and B are only extended to Malaysian players, while international contractors have been invited to participate in the three remaining packages. SapuraKencana’s TL Offshore – the dominant local offshore installer- is widely expected to put in bids for all 5 packages. There will be at least seven other other bidders — Sigurros, PBJV, Perisai Petroleum, Target Energy, GOM and Alam Maritim — all having access to vessels matching the specifications outlined for packages A and B.

-  The first two packages call on the successful contractors to supply offshore construction vessels with between 250 and 800 tonnes of lifting capacities for mostly pipelay work in less than 100 metres of water. TL Offshore will face competition mainly from international contractors for the three other packages, C, D and E. Packages C and D are for pipelay and platform installation respectively and would require vessels with a lifiting capacity of up to 2,000 tonnes.

-  South Korea’s Hyundai Heavy Industries, Japan’s Nippon Steel, and France’s Technip, as well as possibly Italy’s Saipem and USbased McDermott are deemed as potential bidders for packages C and D. As Package E demands heavylift capacities of more than 2,700 tonnes, McDermott, Saipem, TL Offshore and Singapore-based Swiber Offshore are among at least six international players with vessels capable of meeting the contract requirements. Upstream reported that Petronas is said to have cast a wide net, reaching out to contractors traditionally active in the Middle East and Europe, including National Petroleum Construction Company of Abu Dhabi, and Seaway Heavylift. Pre-qualification for the multi-year packages, which will have a potential value of over RM10bil, will start in about mid-July this year with the awards by end-2013.

-  The tender for this contract is not a surprise as we had mentioned it in our earlier reports. We remain OVERWEIGHT on the sector as contract rollouts have accelerated after the recent 13th general election, with 2Q2013 orders surging to RM7.8bil thus far, vis-à-vis RM4.2bil in 1Q2013. By 1Q2014, we expect the final investment decision for the RM60bil RAPID project in Pengerang, which will catalyse multiple tank terminal projects in Southern Johor. In the short- to medium-term, excitement in the sector will still largely stem from the larger field projects in Malaysia such as the enhanced oil recovery projects; gas cluster developments for the North Malay basin; as well as in Sabah and Sarawak which are tied to the completion of the Bintulu LNG complex expansion in 2015. Together with the upcoming increase merger and acquisition activities amongst local service players to achieve greater scale of resources and expertise, we maintain our OVERWEIGHT call on the O&G sector with BUY calls for SapuraKencana Petroleum, Alam Maritim, Dialog Group and Petronas Gas.

Source: AmeSecurities