- Upstream has reported that the turnkey contract to build the over US$1bil Bergading central processing platform (CPP) in the North Malay basin gas and condensate development has been awarded by US independent Hess to Hyundai Heavy Industries and its engineering partner Aker Solutions.

- But a smaller portion of this contract may be awarded to Malaysia Marine & Heavy Engineering Holdings (MMHE), in order to meet local content requirements. Also, a multi-wellhead platform contract related to this development has also been awarded to SapuraKencana Petroleum following the approval from Malaysia’s Petroleum Management unit.

- Hyundai Heavy Industries and Aker Solutions had already started work earlier this week on the contracted engineering, procurement, construction, installation and commissioning work on this CPP as well as a wellhead structure. The CPP involves a topside weighing over 20,000 tonnes which will be installed via a float-over loading procedure onto an 8,000-tonne jacket. Hyundai and Aker are said to have been in talks with Dockwise and Cosco Shipping for the float-over installation, which is scheduled to take place in early 2016.

- The CPP jacket and the wellhead platform jackets, potentially worth up to RM600mil, will be sub-contracted to a yard in Malaysia. Upstream indicated that the local yard could possibly be MMHE. A second contract for three wellhead platforms worth up to RM200mil, encompasses the Zetung, Anggerik and Kezumba fields. Supported by Aker Solutions, this subcontract is likely to be awarded to SapuraKencana.

- North Malay basin project encompasses the development of seven gas fields with combined gas resources of 1.3 trillion cubic feet. The gas project has already entered into production using an early production system comprising a leased floating production, storage and offloading vessel, the Lewek Arunothai, and a wellhead platform fabricated by SapuraKencana.

- This award highlights the increasing level of completion between local and foreign yards, which have a much stronger established track record, as well as Petronas’ efforts to contain escalating cost pressures. Currently, only MMHE together with a foreign joint-venture partner has been awarded a CPP contract and more complex engineering projects for deepwater and enhanced oil recovery developments. The other two local integrated engineering, procurement, construction, installation and commissioning (EPCIC) providers – SapuraKencana and TH Heavy Engineering, have only secured smaller wellhead platform projects or jackets/parts of more complex designs.

- Besides this project and the scaling down of the Semarang field development, there are still multiple EOR projects in the pipeline. Other CPP projects that remain on the cards are the Bardegg2-Baronia, Sepat, Kasawari and Guntong fields. Together with the construction of the Refinery and Petrochemical Integrated Development (RAPID) in Pengerang, Johor, we expect the upward re-rating cycle for the sector to remain intact, as the flow of new orders for Malaysian players have risen by 37% YoY in 1Q2014.

- Hence, we maintain our OVERWEIGHT call on the sector with our BUY calls for SapuraKencana Petroleum, MMHE, Bumi Armada, Yinson Holdings and Alam Maritim Resources. Our HOLD recommendations are for Petronas Gas and Dialog Group. 

Source: AmeSecurities