- Upstream reported that US-based Hess has issued a tender for a floating, storage and offloading (FSO) vessel for its multiplatform gas development in the North Malay basin off Peninsula Malaysia. 7 fields, including the giant Bergading discovery, have been earmarked under the Hess-operated North Malay basin gas development.

- Including the FSO, the first phase of the multi-platform North Malay basin gas project comprises a central processing platform (CPP) at Bergading and 3 wellhead platforms at Zetung, Kezumba and Anggerik. Hess originally intended to commission a newbuild FSO for the North Malay basin gas project. However, the company is understood to have faced challenges in securing a yard slot and has recently approached the market instead for a leased storage floater.

- On offer is a contract for the supply of an FSO for up to 20 years. The contract also comes with an option for Hess to purchase the FSO toward the end of the charter. Contractors are invited to submit proposals for either the conversion of an FSO for the North Malay basin contract or the re-deployment of an existing unit. The FSO is expected to commence operations in December 2016.

- We expect the participants in the FSO tender to include Bumi Armada, M3Nergy, MISC and SapuraKencana. Another potential player could be Ezra Holdings, via its partnership with Perisai Petroleum, which currently has an FPSO for the Kamelia field in the North Malay Basin. In our view, Yinson Holdings, which does not yet have a licence to operate in Malaysia, is unlikely to be one of the bidders.

- In a separate development, 3 shortlisted consortia — Hyundai Heavy Industries-Aker Solutions, Samsung Heavy Industries-Ranhill Worley-SapuraKencana Petroleum, and McDermott-TH Heavy Engineering (THHE) — have put in technical bids for the Bergading CPP. The three consortia are chasing the turnkey contract, which is potentially worth over US$1bil, for the 28,000-tonne structure, which will be tied to 3 unmanned platforms at the Zetung, Anggerik and Kesumba fields.

- The Bergading CPP is to be equipped to handle 450 million cubic feet per day of gas, of which 430 mmcfd will be exported to Teregganu. The CPP contract is expected to be awarded by May 2014.

- A separate tender ongoing for the three satellite platforms- the Zetung, Anggerik and Kesumba fields - has attracted bids from Malaysia Marine Heavy Engineering (MMHE)-Technip, McDermott-THHE, SapuraKencana-Petrofac, and Brooke Dockyards-Ranhill WorleyParsons.

- We note that the pace of work orders for the O&G industry in 4Q2013 surged by 7.5x QoQ and 1.7x YoY to RM12bil (Chart 2) largely due to the award of the Pan-Malaysian transport and Installation umbrella contract and Kraken FPSO charter to Bumi Armada. While 1Q2014 orders are likely to slow down QoQ, the overall upward momentum is still intact. Hence, we maintain our OVERWEIGHT call on the sector with our BUY calls being SapuraKencana Petroleum, Alam Maritim, and Bumi Armada.

Source: AmeSecurities