- Upstream reported that the Pan-Malaysian multi-year tender to undertake transport and installation (T&I) services for pipelines and offshore platforms across 11 production sharing contracts by Petronas has attracted bids primarily from local contractors, as most international players dropped out on concerns over the proposed commercial terms, including capped day rates and uncertainty of workload schedules.

- Participating contractors recently submitted their first bids for the five packages, which are expected to run for three years from the end of the year, with an option to extend for a fourth. SapuraKencana has put in bids for all five packages on offer in the latest tender, including the first two extended only to Malaysian contractors. Packages A and B are for pipe-lay work only, requiring between 300 tonnes and 800 tonnes of lifting capacity for potentially more than 680km of pipelines. SapuraKencana has lined up five vessels, Java Constructor, Sapura 1200, QP 2000, LTS3000 plus a new-build under construction, Sapura 3500. As well as offering the DLB 264, GOM has pledged the Leighton Eclipse through a tie-up with the Malaysian subsidiary of Australia’s Leighton Holdings for Packages A and B. Three other Malaysian contractors are also in the fray for the first two packages — Sigur Ros, Perisai Petroleum and Alam Maritim Resources.

- Given the limited availability of vessels matching the required specifications, Petronas has opened up packages C, D and E to Malaysian and international bidders. Packages C and D are for vessels capable of lifting up to 2,000 tonnes of structures, while package E reportedly demands heavy-lift capacities of more than 2,700 tonnes. Responses to the tender for the three packages have been lukewarm, with major players including McDermott, Saipem, Technip and Abu Dhabi’s National Petroleum Construction Company said to have bowed out of the competition due to capped day-rates and uncertainty surrounding the workload.

- While Petronas has also indicated potentially over 180km of pipe-lay work for Packages C and D and more than 20 days equivalent of heavy-lifting work for Package E, participating contractors were not granted any guarantee on the workload that would have been required for players active elsewhere to commit their vessels to the Malaysian deals. Under the terms of the tender, bids should not exceed RM900,000 per day for Packages A and B; RM1mil per day for Packages C and D and RM1.2mil per day for Package E. Upstream indicated that these day rates are not attractive to international players operating on a global scale.

- Along with a pair of heavy-lift construction vessels from SapuraKencana, Petronas is said to have prequalified about 11 foreign vessels offered by seven non-Malaysian contractors for Packages C, D and E. SapuraKencana Petroleum and Puncak Niaga’s GOM Offshore are the main incumbents for these services. SapuraKencana was awarded three of the four merged packages that were on offer during the last tender in 2009, while GOM secured the fourth.

- With Malaysian players now increasingly more likely to secure this massive T&I job, potentially worth over RM10bil, interest in this sector will remain strong despite the current slow expansion in Petronas’ capex. Newsflow momentum will gain traction, with new orders having surged by 2.2x QoQ to RM17bil in 2Q2013. 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 and 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. We maintain our OVERWEIGHT call on the sector with our top pick being SapuraKencana Petroleum while our other BUYs are Alam Maritim, Bumi Armada, Dialog Group and Petronas Gas.

Source: AmeSecurities