- Upstream reported today that SapuraKencana Petroleum may have secured 3 of the 5 packages on offer under state Petronas’ Pan-Malaysia umbrella tender for a 3-year transportation and installation (T&I) work involving 11 production sharing contracts, reaffirming the group’s dominant status as the leading domestic T&I operator.

- SapuraKencana is poised to clinch packages C, D and E, which requires vessels with heavy lift capacities of over 2,000 tonnes. Upstream indicated that Package E - potentially the smallest of the 3 packages and involving over 20 days of heavy lifting duties - could be merged into C and D.

- The group is expected to mobilise its derrick lay vessels QP2000 and LTS3000 for the Pan Malaysian offshore installation campaigns from as early as next March next year. Additionally, SapuraKencana is also bidding for 2 other pipelay packages, A and B, against other Malaysian players - Puncak Niaga’s GOM Offshore, Alam Maritim Resources-Swiber holdings joint-venture, Barakah Offshore Petroleum’s PBJV and Target Energy.

- Upstream suggested that GOM is close to securing Package B, having successfully pitched its derrick lay barge DLB 264 for the package designed for vessels with at least 800 tonnes of lifting capacity. Sources expect PBJV and politically-connected Target Energy to split the spoils from Package A, designated for shallow-water pipelay work suited for vessels with up to 300-tonne cranes.

- We are not surprised that SapuraKencana has secured the bulk of the 5 packages, given that the group is the incumbent for 3 of the current T&I packages as well as the leading T&I player in the country. Also, expectations were high that GOM would retain one of the packages under the earlier concession.

- But we are disappointed that Alam Maritim may not be able to secure a portion of Package A, given that management had earlier indicated that the charter rate for its iMas-300 accomodation pipelay barge is potentially the lowest amongst the contenders. But Alam Maritim said that its JV with Swiber should still be able to undertake T&I work as a sub-contractor to the main concessionaires. Over the past year, 1Mas-300 has been undertaking work for SapuraKencana’s packages under the existing concession. If there is insufficient work in offshore Malaysia, the JV has the flexibility to deploy the vessel for Swiber’s overseas jobs in Southeast Asia and India.

- We note that the pace of work orders for the O&G industry in 9M2013 had surged by 5x YoY to RM27bil (Chart 6). But in the short to medium term, excitement in the sector would 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 those 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 BUY calls being SapuraKencana Petroleum, Alam Maritim, Dialog Group and Bumi Armada. 

Source: AmeSecurities