OSEA2018 Show Daily Day 2

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OFFICIAL SHOW DAILY PRODUCED BY UPSTREAM

Wednesday 28 November 2018

IN THIS ISSUE SSB Cryogenic Services and Global Petro Storage join forces to bring small-scale LNG solutions to Southeast Asia Page 9 Durasafe: From humble canvas store to leading PPE retailer Page 10 Investing in UAE’s Hamriyah Free Zone Page 11 The impact of US global LNG exports on the Asian market Page 12

Petronas lines up new PSC terms MALAYSIA’S national oil and gas company Petronas has introduced improvements to fiscal terms for new deep-water production sharing contracts, with the aim of boosting upstream investment in the country.

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INSIDE Singapore cheer

Marine and offshore engineering industry recovering from downturn.

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LNG import surge

Southeast Asia expects massive additional volumes over next decade.

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New focus at ZPMC

Chinese yard targets production and installation vessels.

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Rig deal for JDC

Jack-up Hakuryu-11 to drill four wells for Premier off Indonesia.

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Deep costs to rise

Rising price tag for deep-water projects anticipated despite recovery.

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Petronas chief executive Wan Zulkiflee Wan Ariffin Photo: BLOOMBERG

Get up to speed with the latest news from the world of oil and gas. Visit us at Stand BH2 - 10 or log on to www.upstreamonline.com

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New rig deals for Seadrill LONDON-BASED rig owner Seadrill has confirmed a series of new contracts though it was still hit by losses in its third-quarter financial report.

The new awards include Italian operator Eni exercising options to retain the drillship West Gemini off Angola into the first quarter next year.

Eni has exercised options for three wells with the ultra-deepwater unit, adding US$29 million of backlog in a deal that will see it retain the rig until March.

Seadrill also said that US independent Llog Exploration has agreed a 12-month extension with the ultra-deepwater drillship West Neptune in the US Gulf of Mexico, a deal that adds US$57 million in backlog, with a dayrate of US$155,000.

Farther south, Norway’s Equinor exercised the first of two options on the ultra-deepwater drillship West Saturn off Brazil, while US independent Walter Oil & Gas has extended its deal with the semisub Sevan Louisiana for two more wells in the US Gulf, adding around US$7 million in backlog.

In Asia, Petronas has taken the ultra-deepwater drillship West Carina for two wells starting next month off Malaysia, adding US$27 million in backlog.

On the financial front, Seadrill, which emerged from Chapter 11 bankruptcy protection on 2 May, said it posted a net loss for the third quarter of US$245 million.

Operating revenues were US$249 million, but operating expenses hit US$355 million, while financial and other items were US$137 million, further damaging the bottom line.

The company also said it expects adjusted earnings before interest, tax, depreciation and amortisation to be weaker in the fourth quarter than the third.

However, chief executive Anton Dibowitz said: “Having restructured our business, we are now well positioned to capitalise on the recovery.

“The combination of a strong cash position, no near-term amortisation payments or debt maturities and light financial covenants alongside a large modern fleet and continued focus on cost reduction will ensure we remain competitive.

“The fundamentals for our industry remain strong and there are improving signs through increased contracting activity, additional supply leaving the market and industry consolidation which should lead to better pricing in the future.”

Seadrill

Wednesday 28 November 2018

MALAYSIA

Results: Petronas chief executive Wan Zulkiflee Wan Ariffin

Photo: REUTERS/SCANPIX

Petronas targets boost with new fiscal terms Malaysian state oil company improves outlines for new deep-water PSCs as it eyes increased upstream investment AMANDA BATTERSBY Singapore

MALAYSIA’S national oil and gas company Petronas has introduced improvements to fiscal terms for new deep-water production sharing contracts, with the aim of boosting upstream investment in the country.

The fiscal enhancements, centred on self-adjusted cost recovery and a profit sharing mechanism based on a revenue over cost index, are aimed at complementing Petronas’ promotional efforts to attract new exploration investments and to open new exploration plays in Malaysia.

It is understood the improved terms will be available to players taking up new deep-water acreage from the latest licensing round onwards.

The ongoing round comprises nine open blocks — two off Peninsular Malaysia, four offshore and onshore Sarawak and three off Sabah. Petronas had been hoping to line up winners by the end of the year, with new PSCs translating to more oil and gas production in years to come.

Petronas’ total production volume for the first nine months of 2018 was 2.313 million barrels of

oil equivalent per day versus 2.296 million boepd in the same period last year, mainly due to higher liquids output.

Total liquefied natural gas sales volumes so far this year were 20.79 million tonnes, down by 1.12 million tonnes from 2017, due mostly to a decline in production at the Petronas LNG Complex at Bintulu.

The Sabah Sarawak Gas Pipeline (SSGP), which supplies feedstock from fields off Sabah to the liquefaction plant, is undergoing a period of pipeline testing to ensure the completion of intensive pipeline repair works that took place following a leak in January this year.

Petronas confirmed to Upstream that the 10 January pipeline leak had resulted in a supply disruption at the Kebabangan Petroleum Operating Company’s Kebabangan (KBB) field off Sabah, East Malaysia.

However, it emphasised that the outage has not affected its contractual LNG commitments.

Production has been shut in at KBB and is not expected to return to full capacity until August 2019, one month after the overall integ-

rity assurance assessment of the entire 512-kilometre pipeline will likely be completed.

The SSGP usually transports up to 600 million cubic feet per day of gas to the liquefaction facility at Bintulu, Sarawak.

Meanwhile, Petronas’ second floating LNG unit, PFLNG Dua, was 90% complete as of 30 September and the company has participated in two recent discoveries, Tepat in Sabah and Salam in Sarawak.

Petronas yesterday posted higher earnings for the third quarter of 2018, which it attributed to its “continuous execution of business improvement activities focused on increased operational excellence”. It added that the profits increase was supported by higher commodity prices.

The group’s revenue for the third quarter was 63.9 billion ringgit (US15.24 billion), up 19% from the same period last year.

After-tax profit was up 43% year-on-year to 14.3 billion ringgit, primarily due to the higher revenue, which was partially offset by higher product costs in tandem with higher prices, coupled

with increased depreciation and amortisation.

“Petronas continues to record another strong quarterly performance, which has further strengthened our financial position,” said chief executive Wan Zulkiflee Wan Ariffin.

“The improved results are driven by ongoing operational improvement efforts throughout the group and supported by improved oil prices during the period.”

For the nine months ended 30 September, Petronas recorded a 12% increase in revenue to 181.1 billion ringgit.

“Petronas is on track to deliver a strong year-end performance by maintaining our focus on driving efficiency efforts across all our operations,” said Wan Zulkiflee.

“The recent drop in oil prices demonstrates the volatile and cyclical nature of the industry and we will continue to maintain our prudent outlook amidst this landscape while remaining steadfast in pursuing our growth strategies to ensure the long-term sustainability and progress of the company,” he added.

The official OSEA2018 show daily is published by Upstream, an NHST Media Group company, Christian Krohgs gate 16, PO Box 1182, Sentrum, N-0107 Oslo and printed by Markono Print Media Pte Ltd, Singapore.

This edition was printed on 27 November 2018. © All articles appearing in the Upstream OSEA2018 show daily are protected by copyright. Any unauthorised reproduction is strictly prohibited.

This newspaper is published by Upstream, which is solely responsible for its editorial content. The editorial content is not necessarily the opinion of the event organisers.

Wednesday 28 November 2018

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FABRICATION

Singapore sees light ahead Lion City’s marine and offshore engineering industry recovers from downturn

AMANDA BATTERSBY Singapore

SINGAPORE’S marine and offshore engineering (M&OE) industry is beginning to see light at the end of the tunnel after three difficult years, though uncertainties and challenges remain, according to Tan Wu Meng, Senior Parliamentary Secretary for Foreign Affairs and Trade & Industry.

“While we have not completely recovered from the slowdown... we are beginning to see light at the end of the tunnel,” Tan said in his opening address at OSEA 2018.

However, he said that to remain competitive, businesses would need to review their strategies and business models, increase the skills of their workers and adapt to new trends such as digitalisation.

The government is supporting marine and offshore engineering companies with several initiatives, including the Industry Transformation Map (ITM) launched earlier this year.

“The ITM aims (to help) our companies compete through innovation and productivity, helping unions and trade associations to work closer together, helping our industry to grow,” he said. “Together we hope to create 1500 new jobs by 2025 for the (M&OE) industry and to contribute S$5.8 billion (US$4.22 billion) to our GDP.” These plans come as Singapore’s offshore services industry and fabrication yards face increasing competition from regional rivals, such as China, that often have lower cost bases.

Another support measure from the Singapore government is the focus on improving skills and upgrading the capabilities of industry professionals.

“In addition, our unions in the marine engineering cluster are helping our workers,” said Tan. “The Shipbuilding & Marine Engineering Employees Union has used the skills framework to help companies with resource management and talent development.”

Singapore 50 years ago was a small regional ship repair and shipbuilding centre with just four marine companies.

Today it has upwards of 1000 small and medium-size enterprises and companies supporting the O&M industry.

The offshore services industry last year contributed S$2.7 billion to Singapore’s GDP, S$9.8 billion to its total manufacturing output and employed more than 24,000 workers.

Centre stage: Singapore Senior Parliamentary Secretary for Foreign Affairs and Trade & Industry, Tan Wu Meng, at the OSEA 2018 opening ceremony Photo: UBM

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Kor calls for halt to subsidies GOVERNMENTS need to stop subsidising imported liquefied natural gas if Southeast Asian nations are to keep building import demand in the coming years, according to Fabian Kor, vice president strategy, growth and projects, at Singapore’s Pavilion Energy, writes Amanda Battersby.

“Southeast Asia is a huge market for LNG but I think it’s very hard for governments to continue subsidising the cost of LNG through their balance sheets, which is not workable in the long run,” Kor told delegates at OSEA 2018.

He cited examples such as Bangladesh, which recently cancelled a few planned future floating storage and regasification unit import projects because in 2017 the government had spent US$1.4 billion on LNG subsidies.

Meanwhile, in China LNG imports could cost US$10 per million British thermal units while the Shanghai city-gate price is US$9 per million Btu. “So in essence, the national oil companies — or the governments — are subsidising prices.”

Also, LNG often has to compete against conventional gas domestic production that could come in at US$3 to US$4 per million Btu. Kor added that from the governments’ side, clearer energy policy is needed — often there is a stated desire to boost the utilisation of gas yet new coal-fired power plants are still being approved and constructed.

“For LNG to penetrate the market, we need to bring the price down — and not just from the supplier,” he said.

Kor added that shipping and infrastructure costs also needed to be reduced to help make LNG an affordable fuel of choice and “get the molecule to the end-user”.

“The industry needs to work together to find some innovative solutions to bring down the price [of LNG].”

One fundamental problem facing the global LNG industry, which of course impacts the Southeast Asian market, is that there is no market price for LNG as such, noted Alistair Smith, BP’s head of LNG origination, Asia and Middle East.

“We are still a long way away from that. So you need to use proxy measures and take a view of them,” said Smith.

He added that the burgeoning yet nationally diverse Southeast Asian LNG import industry requires a number of bespoke solutions based on individual requirements.

“Sometimes [the LNG is for] diesel replacement, sometimes it’s complementary hydro, sometimes it’s simply replacing depleting gas reserves, as is the case in Thailand and the Philippines.”

Smith said that one of the things BP was working on today was “trying to go downstream to enable markets”.

“Because it’s difficult to manage risk in LNG through the chain. In some ways you need to be involved in all stages of the chain for some markets –— and I think Southeast Asia is one of them,” he added.

Wednesday 28 November 2018

LIQUEFIED NATURAL GAS

Centre stage: BP’s head of LNG origination in Asia and Middle East, Alistair Smith (far left) and Pavilion Energy vice president for strategy, growth and projects Fabian Kor (second from right) at OSEA 2018 Photo: UBM

Southeast Asia braces for LNG import surge Up to 40 million tpa of additional volumes expected to be imported into region over next decade NISHANT UGAL Singapore

LIQUEFIED natural gas imports are set to grow multifold in Southeast Asia, with up to 40 million tonnes per annum of additional LNG likely to be imported during the next decade.

Southeast Asia today imports about 10 million tpa of LNG AND that could increase up to fourfold in a decade’s time, Alistair Smith, BP’s head of LNG origination in Asia and Middle East said while speaking at the OSEA conference in Singapore.

The Southeast Asian region is likely to witness strong LNG demand over the next few years from countries including Singapore, Vietnam, Thailand, Indonesia, Philippines and Malaysia.

While countries such as Singapore and Thailand are already importing LNG, several new entrants including the Philippines, Vietnam and Myanmar at

either looking at building LNG import facilities or have started work on regasification terminals.

The International Energy Agency recently said Southeast Asia is expected to be at the heart of future LNG demand growth, which it expects to increase globally to 370 million tpa by 2023.

With LNG demand expected to increase exponentially in the region, pricing and infrastructure are expected to play a crucial part.

“Pricing is a crucial to see the uptick of LNG demand in Asia,” said Pavilion Energy vice president for strategy, growth and projects, Fabian Kor. Experts also believe that Southeast Asian countries need to improve gas and pipeline infrastructure over the next few years to absorb additional LNG imports.

The increasing share of spot and short-term contracts in the region

is also expected to further boost demand for imported LNG in Southeast Asia.

Spot contracts have risen sharply and now account for about 30% of LNG import volumes in the region, which is set for further increase this year.

“This year we see the rate (of spot and short-term contracts) to gradually increase and go up over the next few years,” said Kor. He added that many consumers are no longer interested in longerterm contracts and are opting for spot and short-term solutions that are more flexible.

Smith said that, “when a spot LNG market starts to emerge, then trading becomes easier and reduces the entry barriers for the industry”.

The LNG regasification capacity of Association of Southeast Asian Nations (ASEAN) members is

expected to increase by 77% over the next decade as countries either build or expand their regasification capacities, according to the ASEAN Council on Petroleum.

The growth in the region’s regasification capacity is expected to come both from onshore as well as floating receiving terminals.

LNG regasification terminals in countries such as Thailand are thought to be operating at much lower than their nameplate capacities.

However, experts are hopeful that capacity utilisation at the existing Southeast Asia import terminals will improve significantly, as demand picks up in the coming years.

LNG

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Wednesday 28 November 2018

CHINA

ZPMC sets course for new vessels strategy Chinese yard looks to target ship-shaped units and market for decommissioning projects

XU YIHE Singapore

CHINESE yard Shanghai Zhenhua Heavy Industries (ZPMC) is pursuing a new strategy focused on engineering, procurement and construction of offshore installation and service vessels and units for oil and gas production.

The Shanghai-based company has decided to put less emphasis on rig building in the current market and is looking to avoid speculative orders in the future.

Instead, ZPMC is keen to concentrate on ship-shaped vessels with high potential for future employment, said executive marketing manager Lin Lin. He told Upstream at OSEA 2018 that ZPMC is involved in talks with offshore operators and lead contractors about possible work on floating production, storage and offloading vessels for operations off Brazil, among other areas.

ZPMC is also actively looking at the decommissioning market for offshore platforms and has approached operators in the UK about possible contracts to provide such services for units in the North Sea, Lin said.

To this end, the company last year completed construction of the installation vessel Zhen Hua 33, which boasts a free deck area of 185 metres by 43 metres, making it the longest vessel in its class.

Elsewhere, Lin said ZPMC has just incorporated its planned joint venture with UK-listed Petrofac to jointly complete and market the subsea installation and pipelay vessel JSD6000.

The joint venture was recently established in Hong Kong with ZPMC holding 90% and Petrofac 10% — in line with Petrofac’s earlier decision to sell the vessel to ZPMC for US$190 million while also taking a 10% interest in the special-purpose entity.

Petrofac earlier said that it will

Strategy: ZPMC executive marketing manager Lin Lin

provide technical support during construction of the unit, which is scheduled for completion in 2022.

The vessel, under construction at ZPMC’s yard in Qidong in Jiangsu province, is equipped to carry out both J-Lay and S-Lay operations at rates of 3.5 kilometres and seven kilometres per day, respectively. The JSD6000 will be capable of operating in water depths of 3000 metres.

Petrofac in 2014 awarded a contract to ZPMC to build the vessel with a targeted delivery date in 2017.

However, Petrofac cancelled that original agreement in 2015 when it decided it would no longer pursue deep-water contracts.

Lin acknowledged that ZPMC suffered in the downturn after 2014, when it committed to build up to four jack-up rigs.

These rigs are completed but idle at ZPMC’s yard in Nantong without employment.

As one potential solution, ZMPC is looking at acquiring upstream assets outside China in order to make use of the rigs.

Under construction: an artist’s impression of the pipelay vessel JSD6000 Image: ZPMC

Photo: XU YIHE

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Faroe rejects DNO bid Board hits out at hostile takeover push LONDON-LISTED Faroe Petroleum has rejected a hostile bid from Norwegian independent DNO. DNO, which already holds a dominant 28.22% stake in Faroe, is offering 152 pence per share for all remaining shares in an unsolicited bid that values the takeover target at £607.9 million (US$780 million).

However, Faroe said its board “strongly believes that the offer is opportunistic and substantially undervalues Faroe and encourages all shareholders to take no action”.

The company said the bid also “fails to recognise the exciting prospects that Faroe has as an independent business” given potential value creation from its Brasse field development prospect and a stake in OMV’s Iris-Hades discovery, as well as possible resource upside from an ongoing exploration campaign.

Faroe said the offer represents only a 21% premium to its closing share price on 23 November — the last day of trading before the bid was made — and is only 1% higher than its average price over the past three months.

“We believe that Faroe is worth substantially more than 152 pence per share and we urge shareholders to reject DNO’s opportunistic, unsolicited and inadequate offer,” it said.

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Santos completes takeover

Wednesday 28 November 2018

RIG MARKET

MERGERS & ACQUISITIONS Australian independent finalises Quadrant deal AUSTRALIAN independent Santos has completed its US$2.15 billion acquisition of privately-owned Quadrant Energy, lifting its production and reserves by about 30%, writes Russell Searancke.

The acquisition increases Santos’ pro forma proven and probable reserves by 220 million barrels of oil equivalent — or about 26% — and lifts its pro forma annual production by 19 million boe, or 32%.

All of Quadrant’s exploration, production and development assets are located in Western Australia, including the exciting new Dorado shallow-water oil discovery in the Bedout sub-basin.

Santos and Quadrant were already joint venture partners in two large domestic gas operations — Varanus Island and Devil Creek.

Santos yesterday said that it paid US$1.93 billion on completion, comprising the purchase price of US$2.15 billion less completion adjustments and cash acquired.

The amount was funded by cash and US$1.2 billion of new debt.

“Santos knows these assets well and has enjoyed a long-established relationship with Quadrant, which has operated our WA natural gas assets for many years,” said Santos chief executive Kevin Gallagher.

“We look forward to welcoming Quadrant’s staff to Santos and integrating our Western Australian operations.”

UBS and JB North & Company acted as financial advisors for the deal.

In demand: the JDC jack-up drilling rig Hakuryu-11

Photo: JDC

JDC wins jack-up deal for Premier in Indonesia Hakuryu-11 on call to drill four wells in Natuna Sea Block A for UK independent, starting in March or April next year RUSSELL SEARANCKE Singapore

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JAPAN Drilling Company (JDC) has secured a new contract in Indonesia to provide a jack-up drilling rig to UK independent Premier Oil. JDC said the Premier contract relates to the use of the jack-up Hakuryu-11 for a four-well programme in the Natuna Sea, beginning in March or April 2019.

The Hakuryu-11 is a KFels Super B Class design that is able to operate in water depths of up to 425 feet. It was built by Keppel Fels and delivered in 2013.

Premier said in its latest trade and operations update that it plans to start drilling development wells at the Bison, Iguana and Gajah-Puteri (BIG-P) gas fields in Indonesia’s Natuna Sea Block A in early 2019 ahead of first gas later in the year.

It said development of BIG-P is continuing within budget and on schedule. Installation of the Naga and Pelikan deck extensions was

completed at the end of September, and fabrication of the subsea structures began in October.

The subsea structures will be installed along with the flowlines, flexible risers and umbilicals during the second offshore installation campaign planned to begin in the second quarter of 2019.

A dive support vessel will then complete the final hook-up and tie-ins around mid-2019.

Once on stream, BIG-P gas will help backfill Premier’s gas supply contracts into Singapore and maintain output from the block.

Premier has said that its net production from Natuna Sea Block A in the first six months of this year was 13,400 barrels of oil equivalent per day.

The company has also identified a potential exploration opportunity at the Tuna production sharing contract, where a two-well appraisal campaign is targeted for 2019 if a farm-in deal is finalised.

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Wednesday 28 November 2018

INDUSTRY OUTLOOK

Rising break-even costs in deep-water spotlight Warning that return of cyclical inflation could increase development price tags MARK HILLIER Singapore

THE deep-water industry appears to be on the road to recovery, but consultancy group Wood Mackenzie has warned that break-even costs could be set to rise again.

According to Wood Mackenzie, the cost of developing deep-water barrels has dropped 50% since 2013 as operators took steps to lower costs after the oil price crash.

It notes the most competitive region is the Americas where more than 50 billion barrels of oil equivalent of pre and post-sanctioned deep-water developments are seen as profitable at prices below US$60 per barrel.

In order to get costs down, operators have downsized projects, increased their focus on subsea tie-backs and brownfield developments, reduced lead times and well counts, while there has also been more phasing of larger developments.

According to Wood Mackenzie’s research, improved project execution has also helped drive down costs and improve returns.

An average deep-water project sanctioned between 2014 and 2016 started up at roughly 5% under budget, compared to projects between 2006 and 2013 which, on average, saw cost overruns of between 10% and 15%.

“One of the key drivers in cost reduction in deep-water projects is lower rig costs, which is a cyclical factor,” added Wood Mackenzie research director Angus Rodger.

“But more importantly, there have also been big structural changes, such as the faster drilling of wells. For example, in the US Gulf of Mexico it now takes half the time to drill a deep-water well compared to 2014.”

With costs coming down and

KISWIRE_N2Hyrope_AD_146x181_161017.pdf 1 2016-10-17 오후 1:34:04

Deep-water giant: the P-66 FPSO in Brazil’s Santos basin

returns improving, annual deep-water capital expenditure is expected to rise from around US$50 billion currently to nearly US$60 billion by 2022, driven by projects in Guyana, Brazil and Mozambique.

However, Wood Mackenzie has warned that the return of cyclical cost inflation could increase the break-even cost of development projects.

“The question now is how much of the ‘structural’ cost savings we have seen through the downturn will prove sustainable through the investment cycle, and which are just short-term company adaptations,” Rodger said.

“We believe that many cost savings are not as ‘sticky’ as industry suggests, and are sceptical that many will stand the test of time during a sustained cyclical uptick.”

One factor that could see costs rise is an expected decline in deep-water rig capacity as older rigs are scrapped over the next few years.

Wood Mackenzie thinks the decrease in capacity could see rig dayrates double by the early 2020s.

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Aquaterra wins platform role at Niger Delta fields

AQUATERRA Energy has been enlisted by First E&P to design, engineer and install a pair of modular offshore platforms for the indigenous independent’s Anyala and Madu fields in Nigeria’s Niger Delta.

The two conductor-supported units, based on Aquaterra’s SeaSwift design, will be installed at the fields in shallow water depths of between 35 and 55

metres to help exploit 185 million barrels of oil and 637 billion cubic feet of gas reserves, with start-up scheduled for late 2019.

The UK-based engineering outfit said it will carry out structural design, topsides engineering, equipment selection, procurement, fabrication management and logistics under the contract, for which a value was not disclosed.

Photo: PETROBRAS

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WA lifts ban on fracking THE West Australian government has lifted its ban on fracking following an independent scientific inquiry, but will only allow activity on already licensed acreage.

The government will keep its existing ban over fracking in the south-west and in the Peel and Perth metropolitan areas, while national parks, the Dampier Peninsular and public water source areas will also be off limits.

The government has also introduced new controls on fracking that will require consent from traditional landowners and farmers before production via fracking is allowed.

Meanwhile, the royalty rate for unconventional gas will increase to 10%, which is the same rate that applies to conventional petroleum production, with royalties from unconventional projects to be used to support new renewable energy projects.

“Banning fracking on existing petroleum titles after the scientific inquiry found the risk from fracking is low, would undermine Western Australia’s reputation as a safe place to invest and do business,” West Australian Premier Mark McGowan said.

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Wednesday 28 November 2018

RIG MARKET

Boost on the horizon for shallow-water rig sector Recovery forecast over next year, though deep-water market may lag behind

MARK HILLIER Singapore

CONSULTANCY Westwood Global Energy is forecasting recovery in the shallow-water rig market over the next year though it expects the deep-water segment to lag behind.

Speaking at the OSEA2018 conference in Singapore yesterday, Westwood director Thom Payne said of 636 shallow-water rigs around the globe, only roughly 48% were currently contracted.

Of the remaining rigs, 31% are waiting for work, 9% are currently cold stacked and 12% are still listed as under construction.

“Forgetting about the under construction (rigs), we currently have utilisation at around 60%,” Payne said.

Based on Westwood’s reference case, the group sees utilisation rates moving up to around 70% by 2022 although under this scenario there will still be oversupply in the market.

“What are we going to do with this 31% of the fleet that’s idle and 9% that’s in lay-up and 12% that’s yet to come into the market?”, Payne asked.

“Well looking at a variety of scenarios we are able to see the impact of scrapping, demolitions and retirements and how quickly it can move the needle.”

He said Westwood’s reference case assumes “a decent level of scrapping”, particularly of older rigs that have been out of work and laid up for more than two years.

“If we were to scrap nothing at all we believe utilisation would continue to hover at sub 60%, which is really no good to anyone at all,” he said.

“If we were to scrap everything that is currently laid up or is in the yard awaiting delivery our utilisation could even move up to 80%, which could really save the industry and have a very positive knock on effect for rates and profitability.”

While shallow-water utilisation rates are expected to begin to rise from 2019, Payne suggested tougher times lie ahead for the deep-water segment which will have a more restrained recovery.

“Deep-water is typically an extremely long cycle. We are seeing an increased level of project sanctioning however, these new

Aramco suppliers bonanza SAUDI Aramco has signed deals worth US$27.5 billion with international suppliers and service providers during its recent In Kingdom Total Value Add (IKTVA) event in Dammam.

Chief executive Amin Nasser said 31 collaboration agreements were signed with multiple companies, but did not elaborate on the workscope.

“Companies that have invested here are ideally positioned to benefit further with our signing last month of 125 billion riyals (US$33.3 billion) in business at the Future Investment Initiative in Riyadh,” Nasser added.

Included in those deals were the four new entrants into Saudi Aramco’s long-term agreements which were previously revealed on Monday China’s Offshore Oil Engineering (COOEC), Sapura Energy, a consortium of UK-based Lamprell Energy and Netherlands-based Boskalis and a grouping of UK’s TechnipFMC and Malaysia Marine & Heavy Engineering.

Other upstream service players, including Abu Dhabi’s National Petroleum Construction Company, Schlumberger, Baker Hughes, ABB, Siemens, Shelf Drilling, Noble Drilling and Ensco were also involved.

The IKTVA is based on Vision 2030, a long-term strategic plan to reduce Saudi Arabia’s dependence on oil and diversify its economy.

The programme makes it mandatory for suppliers and service players operating in the kingdom to attain 70% local content by 2021.

KrisEnergy in cash row

Outlook: Westwood Global Energy Group director Thom Payne Photo: WESTWOOD GLOBAL ENERGY GROUP

projects don’t typically turn into drilling programmes until two or three years down the line,” he said.

“So, if we are sanctioning projects in 2017, 2018 we are not drilling them until around 2020.”

Of the approximately 378 deep-water drillships and semi-submersible rigs globally, Westwood estimated only 30% are currently contracted, with 48% sitting idle, 14% are laid up and 8% still listed as under construction.

“So again, ignoring these under

construction and there are a lot of drillships in South Korea that are awaiting their owners to come and pick them up today, we have a current utilisation of around 40% and again in our reference case we believe that utilisation rates can move to 60% by the back end of 2020 and all the way up to 63% by 2022,” Payne said.

However, he added that in the admittedly unrealistic scenario all idle and under construction rigs were scrapped, the utilisation rate would rise as high as 80%.

Westwood has also looked at the offshore supply vessel market where out of more than 4000 OSVs in the market, it says roughly 1400 are currently in some form of lay-up or cold stack.

Similar to the deep-water segment, Westwood does not expect to see a significant uptick in OSV utilisation rates until new projects move into the development phase.

Westwood expects OSV utilisation to remain below 50% in 2019 but begin to improve beyond 2020

SINGAPORE-BASED KrisEnergy is disputing a US$1.75 million claim by US financial services company Jefferies International.

KrisEnergy received a request for arbitration in Singapore from Jefferies, which alleges it is owed the money under an engagement letter for financial advisory services.

“The company takes the view, in consultation with legal advisors, that the claim made by Jefferies is without merit, as Jefferies is not entitled to compensation for success fees under the engagement letter as alleged, or at all,” KrisEnergy said.

“The company is taking legal advice and intends to vigorously resist and refute Jefferies’ claim. In addition, the company fully reserves its rights to seek remedies, including any counterclaim and costs, against Jefferies to the fullest extent under the engagement letter and at law.”

KrisEnergy added that the claim was not expected to have any material effect on its operations for the current financial year.

Organised by:

Wednesday 28 November 2018

osea-asia.com

Marina Bay Sands

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SSB Cryogenic Services and Global Petro Storage join forces to bring small-scale LNG solutions to Southeast Asia

S

ingapore-based turnkey service provider and EPC company SSB Cryogenic Services (SSB) and Global Petro Storage (GPS) Singapore, a global investment firm specialising in asset management in the energy industry, are joining forces to build and bring small-scale liquefied natural gas supply chain solutions to Southeast Asia.

An initial investment fund of US$50 million will be established by GPS, to invest, own and operate small-scale LNG assets and infrastructure.

SSB will identify and propose opportunities to GPS, at the same time providing technical expertise and support to push forward the development of small-scale LNG supply chain solutions in this region.

The Collaboration Agreement, signed yesterday between the two companies at a ceremony held during OSEA2018, is result of a global push for cleaner energy source, coupled with the announcement on a global cap on the sulphur content of marine fuel.

Both companies, recognising the potential and opportunities in LNG bunkering, intermediate storage and break-bulking activities, as well as the increasing need for LNG supply chain solutions, are committed to providing a total solution for small to mid-scale LNG projects.

The collaboration also brings an avenue for expanding their respective

#OSEA2018

Key events at a glance Virtual Reality Welding Demonstration and Competition Show opening hours, Level 1, 1H3-06 Capitalising Benefits of Additive Manufacturing for Marine and Offshore by Nanyang Polytechnic 10.30am – 11.30am & 2.30pm – 3.30pm, Level 1, 1T2-02 Tech Garage 11am – 4.30pm, Basement 2, BT4-04 Shanghai Waigaoqiao Seminar — Global Offshore Drilling Market Outlook and Latest Offshore Products 2.15pm – 5.30pm, Level 3, Begonia 3012

From left: Enterprise Singapore Executive Director Edwin Chow, GPS Chief Executive Officer Eric Arnold, SSB Cryogenic Services Managing Director Peh Lam Hoh and Senior Parliamentary Secretary, Ministry of Foreign Affairs & Ministry of Trade & Industry Dr Tan Wu Meng at the signing ceremony Photo: UBM

capabilities, through harnessing LNG-related prospects in Southeast Asia regions.

“From liquefaction, bunkering, intermediate storage and break-bulking solutions, to project financing support and investment of LNG-related opportunities, the execution in the LNG last mile solutions will provide a platform to enhance our capabilities and value propositions,” said Mr Peh Lam Hoh, Managing Director, SSB Cryogenic Services.

“The collaboration with GPS will solidify SSB’s position as a total solutions provider in the LNG industry.”

“GPS believes that gas is the fuel of the future and thus is focused on developing optimal onshore and/or offshore infrastructure needed to allow suppliers to access the respective demand centres,” said Mr Eric Arnold, Chief Executive Officer, GPS.

SSB Cryogenic Services, Booth BF3-04

Franklin Offshore & Lankhorst Ropes Agency Cooperation Agreement Signing Ceremony 2pm, Level 1, 1K3-01

OSEA2018 Exhibitor Addendum Six Tee Engineering Group Pte Ltd Singapore Booth: 1J3-06 OSM International Services Netherlands Booth: 1K4-06

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Wednesday 28 November 2018

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Left: Durasafe’s outlet at Suntec City Top: Durasafe’s new look Above: Yew Lian Canvas founder Soh Kim Tow Photos: DURASAFE

Durasafe: From Humble Canvas Store to Leading PPE Retailer How did Durasafe manage to rise from its humble beginnings to a thriving safety workwear empire with regional and award-winning stores?

Durasafe’s Managing Director, Jefferson Soh, tells OSEA more.

I

t all began when Soh’s father, Soh Kim Tow, emigrated from China to Singapore after World War II in 1947.

“Like thousands of other impoverished Chinese immigrants, my father had hoped to seek a better life in Singapore,” explained the younger Soh. “For a couple of years, he worked as a coolie loading and unloading gunny sacks filled with commodities such as spices, sugar and rice near the Singapore River.”

A company was born

However, it’s true that tough times never last but tough people do.

“In 1952, my father used his savings from his hard work to start Yew Lian Canvas at Sungei Road’s now-defunct Thieves Market,” shared Soh. The humble shop sold and recycled second-hand canvas from the British Army. Business became brisk in the 1960s when Yew Lian Canvas managed to supply hatch tarpaulins and canvas to merchant ships through Tong Hin, a pioneer ship chandling company.

Yew Lian Canvas expanded and became the biggest canvas company in Singapore. In 1978, the company was officially incorporated as Yew Lian Canvas Pte Ltd. Waning sales

However, business started to decline due to improved hatch covers and the standardised usage of containers

on-board ships — less canvas was required to cover hatches and cargo.

The container shipping industry continued to grow exponentially in the 1970s and 1980s, pushing the canvas business to the brink of oblivion.

Change or die

“I was a computer system consultant when I took over the business in 1993 with a challenging task to turn around the ailing business,” said Soh. “I capitalised on our existing customer base and started to supply coveralls and safety shoes to ships, initially through ship chandlers, and gradually to ship management and ship owners.

“Every ship needs coveralls and safety shoes for her crew, and soon I was supplying gloves, eyewear and other personal safety products to the shipping, oil and gas industries as well.”

Thanks to Soh’s astute business acumen, the company was revitalised and became a complete personal protection equipment (PPE) supply company and in 2000 it moved to bigger premises at Shun Li Industrial Park.

A refreshed look

In 2004, the company was renamed to Durasafe Pte Ltd. It also boasts a new logo and mission statement: “No One Gets Hurt”. The logo features a round emblem and Green Cross, which is synonymous with safety.

The canvas business officially

shuttered its doors in 2008 and Durasafe continued to grow to become the largest safety product stockist in Singapore with more than 5000 products.

New products including Dropped Tool Protection, Safety Gates, Safety Cabinets, Spill Control, Life Saving Equipment, Anti-Piracy Products, Insulated and Hand Protection Tools are constantly added to the company’s inventory.

Milestones and the future

• In 2012, Durasafe opened its first retail store at Westech, offering the latest and most fashionable workwear. The retail store won the Red Dot Award for Best Interior Design — one of the world’s most prestigious design awards.

• Durasafe was first in Asia to open a Tool@rrest Retrofit Centre, providing retrofitting of hand tools for dropped tool safety.

• In 2015, Durasafe opened its first overseas branch in Vietnam. Fronting the office is a retail store featuring the latest safety products and workwear.

• Durasafe welcomed its Suntec City store in the same year, selling both safety products and sportswear — a new concept that has been generating a lot of buzz in the retail industry.

• In 2017, Durasafe launched its online store and mobile app featuring more than 10,000 safety products and sportswear.

• In 2018, an innovative safety vending

machine was launched at Durasafe Suntec, providing 24/7 convenience for customers. This vending machine is on display in Durasafe’s booth at OSEA2018.

• As part of Durasafe’s 40th Anniversary celebrations, the company moved to a 38,000 square feet centralised office cum warehouse at T-Space in October.

The new premises at Tampines sport a bigger showroom cum retail space for safety products and sportswear.

• In 2019, Durasafe plans to launch a bigger retail store at Jewel Changi Airport. This will be its flagship store featuring the best premium brands in sports. Think activities like running, cycling, swimming, triathlon, skiing, surfing, diving, skateboarding and rock climbing.

The Jewel outlet will showcase an innovative Magic Mirror that allows customers to browse, try and compare different outfits or sunglasses.

Should a shopper like the items he or she has tried, they can be saved and sent to their mobile phone for future purchase. In addition, there will also be a cold room that allows customers to test out cold-weather apparel in sub zero conditions. · In 2020, Durasafe will launch a mobile showroom capable of supporting customers at their outdoor safety or sports events, or other public events.

Durasafe, Booth 1G3-01

Wednesday 28 November 2018

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Investing in UAE’s Hamriyah Free Zone Under the leadership of Mr Saud Salim Al Mazourei, Director of the Hamriyah Free Zone, the bustling hub is now home to more than 6,700 companies, up from 81 companies in 2000. He shares with OSEA his insights into the initiatives in place for investors to reap benefits from their investments in the region.

T

he Hamriyah Free Zone (HFZ) is the second largest and fastest-growing Industrial Free Zone of UAE and home for 6,700 companies from over 160 countries.

HFZ started around 20 years back with a handful of companies in a small area near Hamriyah Port.

Today, it has expanded to a land area of 30 square kilometres, hosting more than 6,700 companies from over 160 countries, and employing more than 50,000 people in the zone.

HFZ has Middle East’s largest Steel Zone with more than 165 steel manufacturers and fabricators.

It is also home to the United Arab Emirates’ second largest petrochemical, oil and gas hub and second largest marine and shipbuilding hub.

We have launched the first Food Park of the Middle East with state of the art infrastructure and world class facilities, and we are also the first free zone in the Middle East to offer a Business Licence in less than an hour.

Staying ahead of competition

Hamriyah Free Zone Authority (HFZA) has always wanted to stay ahead of the competition. We did a thorough market study and researched on business trends, challenges, Investors’ behaviour, their requirements and interests. We found that competitiveness, speed and ease of doing business and support were key factors for attracting investment.

We capitalised on our research and reengineered our business processes by simplifying time-consuming and complex steps. It took us some time, but our efforts proved successful in reducing the time needed for our services.

We have also introduced a number of value-added services for investors through our internal departments and partners. HFZA has also started acting as an interface between investors and other government authorities, which gives utmost comfort to new investors.

Other than providing quality service with ease and speed, we’ve invested heavily in infrastructure enhancement for our Free Zone, and we’ve also promoted our Zone globally.

As a result, we have become one of the fastestgrowing Free Zones in the Middle East and a primary hub for many sectors, and our growth is continuing in spite of challenges and the global economic slowdown.

Embracing technology

Technology has played a great role in simplifying complex and time-consuming business processes and the overall development of the Free Zone. Today, 80%

Hamriyah Free Zone director Saud Salim Al Mazourei

of our services are offered online and we are working towards increasing that.

We’ve closely analysed key areas of automation and development and implemented an integrated system across different departments in the HFZA. Amongst other improvements, it now allows us to issue a trade licence in less than one hour.

Capitalising on our IT infrastructure, we have a geomapping system which seamlessly updates the status of the facilities. This makes it easier for all the departments of the organisation to access updated information at all times.

Investment opportunities in Hamriyah Free Zone

HFZ is a one-stop destination for all industry sectors and company sizes, from small and medium-size enterprises to large industries and corporations — a rare opportunity in the region.

Additionally, the oil and gas sector is one of the key

focus areas for the Free Zone, and we are witnessing major growth in this sector, supported by healthy oil prices.

The HFZ provides very good investment opportunities for Asian companies — we have created a platform for entrepreneurs to start their business and with room to expand if they require.

Takeaways from OSEA Conference

The major highlight would be that the Hamriyah Free Zone is the most cost-effective integrated Free Zone, especially for petrochemical, oil and gas companies from all around the world. We have witnessed constant growth for all the companies operating in this sector.

I will also highlight the benefits, logistical advantage, world-class infrastructure and future plans for the Zone. We strongly believe that for those who wish to set up their base in the region, Hamriyah Free Zone is potentially their best option.

Conference Highlights: Wednesday 28 November 9.00am

Chairman’s Opening Remarks

9.05am

How US Global LNG Exports Will Impact the Asian Market: New Structural and Financial Considerations

10.00am

Panel Discussion: Role of Small Scale LNG Shipping in Growing Energy Market

10.45am

Morning Tea Break

11.15am

Floating Production Market Status and Outlook

11.45am

UAE Market Outlook and Investment Opportunities for Oil & Gas Companies

Lunch Break

12.00pm 1.30pm

Masterclass: Flow Assurance and Impact to Field Development and Operation

2.30pm

Masterclass Sponsor: Swagelok Singapore — Facility Life Extension and Performance Optimisation

Afternoon Tea Break

3.30pm

Photo: UBM

3.45pm

Masterclass Sponsor: BMT — Determining Spares Criticality through Understanding of Risks

4.45pm

End of Conference Day 2

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Wednesday 28 November 2018

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The impact of US Global LNG Exports on the Asian Market OSEA conference speaker, Dr Kent Moors PhD, Executive Chairman, Energy Capital Research Group, comments on the new structural and financial considerations of US global LNG exports, and how they will impact the Asian Market

O

ne of my betterknown public positions is in support of a developing energy balance. The future of meeting global demand rests with increasing the number of distinct interchangeable sources.

Seeking a single solution — some “silver bullet” to wean us from crude oil — is fundamentally wrong. This is hardly a zero-sum, one size fits all, approach.

Yet, a sourcing balance must acknowledge two overarching realities.

First, the Asian market will drive global energy demand, development, and pricing at least through 2040.

Second, despite advances in other sources, oil, natural gas, and coal will remain the mainstay worldwide.

The question is from where they come, how they are delivered, and the extent of integration.

Here, the rise in natural gas usage has fundamentally altered current projections.

China has the world’s largest technically recoverable shale and tight gas resources, a potential Asian domestic sourcing base. Meanwhile, import venues are no longer controlled solely by cross-border pipeline throughput.

The former faces significant technical and capital impediments, mitigating shortterm applications. On the other hand, the latter introduces this generation’s single biggest change in global energy trade.

The acceleration in liquefied natural gas has been

astounding. LNG has introduced direct competition to long-term, oil-based, take or pay pipeline contracts.

It also advances the introduction of a hub network where spot markets will progressively take over pricing.

With terminals at both ends sufficiently developed, and train production reaching adequate volume, LNG provides the accelerating central element in an Asian transition.

However, reliable sourcing remains a significant concern.

Projects located in the Asian neighbourhood — Australia, Papua New Guinea, even Russia — have been put forward and will certainly be in the mix. However, the required cargo flexibility needs a primary swing provider.

The US is emerging as that provider.

American LNG is poised to be the fastest growing Asian sourcing flow.

From providing about zero of global volume in 2015, it will rise to 6%-to-8% of worldwide consignments as early as 2020.

Exports to Asia head the list as LNG exports become an increasingly attractive outlet for expanding US domestic gas production.

For two years, I have been personally involved in the international design of new transformative investment and project structures, along with risk hedging approaches to undergird energy trade.

These are the most significant revisions in investment attitude I have ever witnessed, involving unparalleled use of privately

Energy Capital Research Group executive chairman Kent Moors

networked finance, with a decisive impact on LNG trade.

But problems remain.

US-Chinese tariff tiffs have put American LNG Asian exports in the crosshairs. Emerging crosscontract swaps and derivatives are

altering conventional notions of suppliers and end-users. Pushback from traditional providers and a widening limitation in tanker capacity are also factors.

Nonetheless, geopolitical and market travails aside,

Photo: ECRG

American LNG is already an increasing component in the Asian aggregate energy sourcing transformation. From the standpoint of both investor and user, this is about to become very interesting.

Snapshot: OSEA2018 Opening Ceremony DR Tan Wu Meng, Singapore’s Senior Parliamentary Secretary, Ministry of Foreign Affairs & Ministry of Trade and Industry, graced OSEA2018’s Opening Ceremony as Guest-ofHonour.

The Opening Ceremony featured speeches by Dr Tan, Mr Paul Wan, Managing Director, UBM Singapore and a keynote address by Mr Thom Payne, Director, Westwood Global Energy Group, who spoke about The Future of Global Oil & Gas Supply and Demand Dynamics.

The programme ended with Dr Tan taking a tour of the show floor. Here’s a look at the

key highlights!

Photos: UBM

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Wednesday 28 November 2018

13

Dommo in deal for OSX-3

AMERICAS

Floater charter extended for up to 20 years

Flag day: the CNH has signed off on more exploration work for 2019

Photo: AP/SCANPIX

CNH gives go-ahead for Mexico exploration push Regulator issues approvals for work to be carried out next year by Eni, Pan American Energy and Petronas

Gas policy to change

KATHRINE SCHMIDT Houston

MEXICO’S oil regulator has issued fresh regulatory approvals for oil and gas exploration work that is set to take place next year.

Among them, the National Hydrocarbons Commission (CNH) has given the green light for Italian major Eni’s work programme and budget for 2019 on Block 7, won in Mexico’s Round 2.1.

The plans call for spending of anywhere between US$36.6 million and US$53.5 million to drill at least one well at either the Ixchel or Yatzil prospect, between March and May. Preliminary work for a second well would begin in late 2020 under the programme.

The company may add more work if results turn out well at the block, which lies off Tabasco state in water depths between 150 and 550 metres. Eni has committed to

at least two wells on the block in the initial four-year exploration period, and could drill an additional probe as well, according to its previously-approved multi-year exploration plan.

The Italian company has hired the semi-submersible Ensco 8505 drilling rig to drill two wells off Mexico, as well as six wells in the US Gulf.

Eni was also approved in recent weeks for a detailed work programme involving one well on Block 10, which it also won in Round 2.1.

The CNH has also approved a multi-year exploration plan for Malaysian state oil company Petronas on Block 6, also won in Mexico’s Round 2.1.

That block lies about 20 kilometres off Veracruz state, in water

BRAZILIAN independent Dommo Energia has agreed to extend the charter of the OSX-3 floating production, storage and offloading vessel for a period of up to 20 years, writes Fabio Palmigiani.

The FPSO, which belongs to a group of the company’s former creditors, is currently producing about 6000 barrels per day of oil from the Tubarao Martelo field in Brazil’s Campos basin.

According to Dommo, charter payments will be calculated and paid upon each offload operation and will total up to US$47.2 million per year, equivalent to a dayrate of US$129,315.

In order to secure the longterm charter, Dommo will make a payment upon signing the contract of US$50 million, plus another payment of US$15 million by September next year.

The new agreement will allow the company to resume its planned revitalisation of Tubarao Martelo.

Dommo intends to complete well 4HP that has already been drilled and connect it to the OSX-3 FPSO, as well as carry out workover activities on four other wells — 2HP, 6HP, 8H and 44HP. The aim of the revitalisation initiative, which is expected to cost US$80 million and extend the Tubarao Martelo life cycle to 2024, is to increase production in the field to 10,000 bpd by late next year.

Tubarao Martelo is the company’s solo asset, after an arbitration court ruled that Dommo should lose its 40% interest in the Atlanta field for failing to make cash call payments to its partners Queiroz Galvao E&P and Barra Energia.

depths between 20 and 80 metres. Petronas has proposed activities with a budget between US$87.5 million and US$99 million, including one well.

Its schedule has wide latitude on the timing, however, with work planned sometime between the fourth quarter of 2019 and the second quarter of 2021.

The plan outlines scenarios that could include the reprocessing of existing seismic or the acquisition of between 480 square kilometres and 900 square kilometres of 3D data, and work on the Metzli-1 prospect.

Finally, the CNH also signed off on the budget and work programme for Pan American Energy to carry out development activities on Block 2 from Round 1.2.

The approval authorised a total

of US$396.4 million in spending for construction of new production facilities as well as the completion of the Hokchi-4DEL well and drilling and completion of the Hokchi-7 well.

Sapura Energy last week said it had landed the engineering, procurement , construction, installation and commissioning contract for the development work.

CNH commissioner Nestor Martinez Romero pointed out that Pan American had opted to start water injection early at the project, the first such application of its kind in Mexico and potentially an interesting industry test case.

Overall the field, which is expected to start production in 2020, is planned to recover 147.8 million barrels of oil and 45.4 billion cubic feet of gas.

STATE regulators in North Dakota have amended an April 2018 gas capture policy in an effort to streamline US federal right-of-way processes and encourage investment in value-added projects.

The North Dakota Industrial Commission said recently it had opted to revisit the policy due to the “staggering pace of gas production... out of new wells” in the US state, as the region continues breaking both oil and gas production records almost every month.

“The goal of this policy is to increase the volume of captured gas and reduce the percentage of flared gas, in addition to encouraging investment in gas capture infrastructure,” the commission said.

The decision comes after the state increased gas capture limits on 1 November from 85% to 88%.

“

”

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To stay fully abreast of the latest energy news from around the world, you could try subscribing to multiple publications or spend hours trawling the web. Alternatively, you could get it all from one reliable high-quality source – Upstream.

In addition to the acclaimed weekly edition, subscribers are given full access to UpstreamOnline.com, offering unlimited access to our 24-hour news service and a complete electronic search engine. You can also choose to receive daily news bulletins containing a quick summary of the must-read news from the last 24 hours. Altogether, a wise investment in knowledge that saves you time and helps your business.

Why waste time and money on scores of magazines, newsletters and overpriced reports when your energy information needs can be met through one single subscription to Upstream? For your free two-week trial, please go to:

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Wednesday 28 November 2018

15

CORPORATE OUTLOOK

Leading the way: Transborders Energy managing director Daein Cha and chief financial officer Anna Sudlow

Photo: JOSH LEWIS

Transforming Transborders Australian company targets small-scale FLNG project developments for expansion opportunities JOSH LEWIS Perth

AUSTRALIA has been known for its giant liquefied natural gas projects in recent years, but Perthbased start-up Transborders Energy is pursuing a different track as it looks to small-scale floating LNG technology to develop stranded gas resources.

Managing director Daein Cha told Upstream the formulation of the business began after the oil price crash in late 2014.

When looking at potential developments, Transborders assessed both onshore and offshore conventional resources in Australia, but Cha says onshore opportunities proved to be limited and that directed the company’s focus more offshore.

It was then determined that resources bigger than 5 trillion cubic feet were on the radar of international and national oil companies and placed them in a space in which the fledgling start-up would be unable to compete.

“So that put us in the small-tomid-size area in terms of identifying what opportunities were out there,” Cha explains.

“When you run a preliminary screening based on 0.5 to 5 Tcf discovered but stranded gas resources we found out that there’s about 40 of them in Aus-

tralia, so we thought OK that’s a good pocket to go into,” he adds.

The natural technology that Transborders was drawn to in order to develop the stranded resources was FLNG, with the its generic 1.2 million tonnes per annum FLNG solution predicated on achieving a breakeven free on board LNG price of US$6.50 per million British thermal units.

This positions Transborders Energy’s FLNG solution in the second quartile of cost competitiveness among existing or under-construction LNG projects globally.

Cha says meeting that level of competitiveness was one of the first tasks Transborders chairman Jack Sato set the company.

“He strongly recommended us to first articulate the LNG industry supply capacity and cost curves and he challenged us to position ourselves in the second quartile of relative competitiveness because if you can’t compete in that type of space or if you are not in that relative competitiveness space, you’ll be washed away,” he adds.

Last year, Transborders was proposing to take an operated equity position in a stranded resource to deploy its technology.

However, its strategy has changed tack since the addition of chief

financial officer Anna Sudlow to the board.

“I guess the model we are looking at (now) is more like the (floating production, storage and offloading vessel) model to be honest where the resource owner can lease the FLNG vessel from the FLNG vessel owner and just be responsible for developing the upstream,” she told Upstream.

This places Transborders in a position of looking to provide a development solution without necessarily having to own the resource.

“Our solution doesn’t require us to (own a resource) so I think for a resource owner that would like to maintain their equity position in an asset, it provides a solution where they can book all their resources or reserves and then they don’t have to provide the capex for the FLNG vessel so I think it’s quite a good fit for a lot of those smaller stranded gas resources,” Sudlow explains.

“I think the significant benefit to us has been pitching a different way of doing business commercially to, particularly, the LNG buyers.”

Earlier this year, Transborders entered a joint study agreement with an unnamed Asian LNG buyer that will see the pair carry

out technical pre-front end engineering and design to allow the FLNG solution to cater for a range of discovered but stranded gas resources.

The joint study is expected to be completed early next year and over the next 12 months Sudlow says Transborders plans to develop the technical and conventional pre-FEED of its generic FLNG solution.

It hopes to then be in a position to approach resource owners and present a commercial and technical solution for accelerating the development of their stranded resources.

“If you can say to a resource owner who’s got say a 1 Tcf resource and you can bring the (early part of the project) forward by one year, you’re going to deliver them, just from the time value and money perspective, US$30 million to US$50 million so that’s a material benefit to them,” Sudlow said.

“It’s more than that, but if you just look at that piece of it that in itself I think it’s a pretty compelling story for a lot of resource owners.”

While Transborders has largely been focused on resources in Australian waters given the executive team’s experience in the region, Sudlow says the company’s devel-

opment concept has been attracting interest elsewhere.

“We are getting resource owners from all over the place who are quite interested, some of them are in jurisdictions that have got challenges as far as ability to finance,” she says.

“So I think Australia is logical, but we are open to discuss with other parties and we would need to bring a local partner in on those jurisdictions ultimately.”

Transborders is aiming to sanction its first project around 2020 and targeting deployment of its FLNG technology by the mid-2020s just as a supply gap is expected emerge in the LNG sector.

It is already partnered with TechnipFMC for the engineering, procurement, construction and installation of the FLNG vessel, as well as subsea umbilical, risers and flowlines.

Norway’s Add Energy has been brought in for engineering, procurement, construction and installation package of the wells workscope, while Japan’s Modec is serving in an advisory capacity for the FLNG hull, together with the LNG tank and the turret mooring system. It will also advise on operations and maintenance and could potentially operate the facilities once on stream.

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Wednesday 28 November 2018

SINGAPORE

Dyna-Mac plots new course for expansion Singapore’s ‘secret pearl’ looks to boost profile and presence in fabrication sector JOSH LEWIS Perth

SINGAPORE’S Dyna-Mac is looking to increase its presence in the oil and gas industry by building new partnerships and diversifying the services it provides.

Dyna-Mac chief development officer Satish Malik tells Upstream that the company is targeting an increase in revenues by selling proven products to new customers and new products to existing customers.

Malik recently joined Dyna-Mac after leaving his post as Singapore country director and senior vice president for engineering and construction, Asia-Pacific, at US contracting giant KBR. Dyna-Mac was originally founded by chairman Desmond Lim as a pipe fabrication shop in 1990, but now fabricates topsides modules for the likes of SBM Offshore, Bumi Armada, Keppel Fels, Modec and others.

This has seen it create the topsides modules for such flagship projects such as Total’s Pazflor floating production, storage and offloading vessel off Angola, Shell’s Stones FPSO in the Gulf of Mexico, Petrobras’ P-57 FPSO off Brazil, the FPSO at Tullow Oil’s Jubilee field off Ghana, Woodside Petroleum’s Okha FPSO off Australia, Oil & Natural Gas Corporation’s D1 floater off India and the FPSO at EnQuest’s Kraken field in the UK North Sea, among others.

Dyna-Mac this year also fabricated a module for Noble Energy’s Leviathan production platform off Israel and is in the process of loading out the 12 modules it constructed for the FPSO destined for the first phase of US supermajor ExxonMobil’s Liza development off Guyana.

Despite this work, Malik describes Dyna-Mac as a “secret pearl” that is little known by much of the oil and gas industry.

Malik plans to use his 44 years of experience in the oil and gas industry to help Dyna-Mac boost its profile, leverage strategic partnerships and move up the value chain.

A key objective in his strategy will be for the company to provide complete engineering, procurement and construction for modules on a lump-sum contracting

basis. In order to be able to provide lump-sum EPC services, Malik is already in discussions with service providers to create the alliances and partnerships required to boost Dyna-Mac’s engineering capabilities.

“You must make sure your engineering is correct,” he says.

“I have had a very positive response from a unique services provider and my focus will be [to] have world class engineering contractors of repute, but we will also have our project management team to make sure everything is on track.”

One partnership Malik is also keen to expand upon is that with major shareholder, and fellow Singaporean company, Keppel.

“We have a common backyard,” Malik explains.

“Keppel holds a 24% share in Dyna-Mac so I know they have been co-operating, but I want to take this co-operation to a greater height.”

Malik believes Dyna-Mac’s expertise in fabricating topsides modules combined with Keppel’s experience with building substructures make the two companies a good fit in pursuing work together.

“Keppel is a big factor which I have in mind,” he adds. “I have to make it work, but I am confident... that things will happen.”

Another part of Malik’s strategy for Dyna-Mac is increasing the client base by adding more diversity to the services it provides.

“Our objective of course is to not rock the boat, to serve our existing customers with more intensity, to do more value addition for them and at the same time move up the value chain and of course diversify the customer base,” Malik says.

He adds that the company will also focus on new areas such as the liquefied natural gas arena, floating LNG vessels, floating storage and regasification units, smaller wellhead platforms and central processing platforms.

However, he notes that DynaMac will also continue to “aggressively pursue” what it is already good at, namely the fabrication and construction of topsides mod-

Looking to the future: Dyna-Mac chief development officer Satish Malik

ules for FPSOs. Malik says the company is also looking to focus on onshore modules for LNG developments and refineries.

Dyna-Mac’s main yard is in Singapore and has a maximum loadout capacity of 27,000 tonnes, while it has an aggregate fabrication capacity of approximately

40,000 tonnes. It also has access to facilities in Malaysia, Brazil, China and the Philippines but could look to gain access to larger facilities to increase capacity as it targets bigger contracts.

“We will have some kind of licensed partnerships with some yards, because supposing I go to

Photo: DYNA-MAC

100,000 or 150,000-tonne projects (in aggregate), how do I do it (with the current yard capacity), so we will have some back-up plan,” Malik says.

“We will grow through those things, through alliances, partnerships - I think that’s the main thing that’s going to happen.”