- Upstream reported today that 3 consortiums involving two Malaysian local yards, SapuraKencana Petroleum and Malaysia Marine & Heavy Engineering Holdings (MMHE), will be competing for a front-end engineering and design (FEED) tender involing a turnkey contract for the Petronas’ Kasawari natural gas development in Block SK 316 off Sarawak.

- Petronas has shortlisted Hyundai Heavy Industries, which has teamed up with Ranhill Worley; Sapura-Kencana with Italy’s Saipem; and MMHE with Technip. Berlian McDermott, a joint venture between TH Heavy Engineering and US-based McDermott, did not progress beyond the pre-qualification round of this contest.

- Recall that this huge project involves a 30,000-tonne 8-legged central processing platform (CPP), which has topsides weighing 19,000 tonnes, a 9-slot wellhead platform, a bridge link, a flare tower, and an over 7,000 tonne central collection platform. As the structures could collectively weigh up to 37, 000 tonnes compared to SK316 CPP’s 33,100 tonnes (see picture 1), which was awarded last year to the Technip-Malaysia Marine & Heavy Engineering Holdings (MMHE) joint-venture, this Kasawari development could easily cost over US$1bil (RM3.3bil).

- Recent moves by Petronas to bid out the CPP and wellhead structure separately for the Bardegg 2 and Baronia enhanced oil recovery project had sparked speculation of a similar approach for the Kasawari tender. However, Petronas has instead pressed ahead with a single tender package for Kasawari as it looks to meet its fast-track development schedule for the field.

- Petronas had limited the participation to contractors with a minimum of 10 years of experience in handling projects involving carbon dioxide removal process given that the gas from the Kasawari field contains high carbon dioxide content, which could be more costly to extract and produce. First gas from Kasawari is targeted 3 years from the award of the turnkey contract, with the offshore production structures scheduled to be completed within 15 months.

- The winner of the Kasawari FEED tender will also secure an engineering, procurement, construction and commissioning (EPCIC) contract, scheduled to be awarded in late 2015 or early 2016. As Technip took charge of the conceptual studies of the Kasawari field development, and the JV between Technip and MMHE had eventually secured the first SK316 CPP, we believe that they stand as the most likely candidates to secure this project.

- Upstream had earlier reported that the turnkey contract to build the over US$1bil Bergading 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 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.

- There are still multiple EOR projects in the pipeline involving other CPP projects such as the Bardegg2-Baronia, Sepat 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. 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