Bumi Armada in for two new jobs

by **Cals** Sat 24 Aug 2013, 23:36

Published: Saturday August 24, 2013 MYT 12:00:00 AM
Updated: Saturday August 24, 2013 MYT 7:28:56 AM
Bumi Armada in for two new jobs
BY JOHN LOH
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A file picture shows Bumi Armada’ s FPSO vessel Armada Sterling. FPSOs are the oilfield services provider’s most lucrative segment, making up some 70% of its current order backlog.

WITH a bit of luck, Bumi Armada Bhd could bag two floating, production, storage and offloading (FPSO) vessel jobs as early as next month.
These are the long-awaited, but much-delayed Madura in Indonesia and Kraken in the resource-rich waters off Europe’s North Sea.
Madura, operated by Canadian Husky Energy, is a small-sized FPSO with capital expenditure (capex) estimated at about US$400mil and a 10+5 year charter. First production has been set for 2016 (see chart).
Kraken, operated by UK-based EnQuest PLC, is a mid-sized FPSO with capex in the US$1bil range. First production for this vessel is also slated for 2016.
Both projects have been whittled down to a two-horse race. For Madura, Bumi Armada is understood to have edged out the Sillo Maritime-Emas Offshore-Federal Offshore consortium with a lower bid. BW Offshore had earlier pulled out after a re-tender. The gas condensate development is said to be worth a cool US$1.18bil.
For Kraken, only Bumi Armada and New York-listed Teekay, the North Sea’s largest FPSO firm, are still in the running.
At a briefing to announce the group’s second-quarter results earlier this week, Bumi Armada executive director and chief executive officer Hassan Basma expresses confidence that the FPSOs may see awards in September.
When the question is posed to him, he wittily retorts: “We are always optimistic, or we wouldn’t be in this business. We feel that we have done enough work to position ourselves for the projects.”
But the outcome of an FPSO bid can be notoriously hard to predict. Madura, at least, has been beset with problems. Its terms had to be renegotiated after bids were submitted at 40% above the US$857bil budget initially approved by the regulator.
On top of that, the chairman of SKK Migas, Indonesia’s energy regulator, was arrested last week for a corruption scandal, which led to a freeze on all oil, condensate and natural gas sell tenders.
Anti-graft investigators swooped in on Rudi Rubiandini’s home in South Jakarta two Tuesdays ago on suspicions he accepted bribes totalling U$700,000 from a foreign company, Indonesian media reported.
It remains unclear as to how the incident will affect Bumi Armada’s chances.
While he says the situation is “regrettable”, Hassan isn’t throwing in the towel.
“The country doesn’t depend on one person. There are processes in place for these circumstances. We expect things to go smoothly,” he explains.
For these reasons, analysts think Kraken may be “warmer”. If successful, it would be Bumi Armada’s first undertaking in the North Sea and a harsh environment, CIMB Research points out.
Nonetheless, some industry observers wonder if the Kraken FPSO was a good deal to begin with, given that the bigger Norwegian players stayed on the sidelines.
Still others believe that winning Kraken would be a coup of sorts for Bumi Armada, currently the world’s fifth largest FPSO company, because it is double the size of Bumi Armada’s existing FPSO fleet and thus akin to two FPSO jobs.
FPSOs are the oilfield services provider’s most lucrative segment, making up some 70% of its current order backlog.
An FPSO vessel is used to receive and process raw oil from a nearby drilling platform. The oil is then stored and offloaded onto a tanker or through a pipeline.
Not one to sit on his hands, Hassan says the firm is on the tender list for 12 more potential FPSO contracts, after having won one earlier this year in India.
Bumi Armada is also in the midst of finalising a vessel purchase for its oilfield services division, an arm of the group created to carry out marginal oilfield and enhanced oil recovery work.
And it isn’t banking on Petronas alone, Hassan says. The use of the asset had been offered to the national oil company as well as Mexico’s state-owned Pemex and Brazil’s Petrobras.
To augment its gas operations, Bumi Armada is bidding for five floating storage and regasification jobs, or FSRU in industry parlance, which Hassan says has potential contract values in the same league as FPSOs of about US$1bil.
Bumi Armada shares have shed about 3% of their value since the start of the year amid a drier FPSO deal flow. They were last seen at RM3.86.