SEMBCORP Marine is ramping up the competition in Brazil by building a shipyard there to tap the country's fast-growing offshore oil and gas market. The firm has acquired 825,000 sq m of freehold land through its Jurong Shipyard subsidiary, it announced yesterday. The site is in the state of Espirito Santo, near one of the recently discovered oil-rich basins.
Based on an industry estimate, it is likely to cost between US$100 million (S$141 million) and US$150 million for the site and initial development, with the payments spread over the next two to three years, said a Nomura report. SembMarine is eyeing contracts from Brazilian oil giant Petrobras, which plans to award 28 offshore oil rig contracts by the third quarter this year.
'(SembMarine) is one of just a handful of shipyards which have tendered for the project,' Nomura Singapore analysts said. SembMarine has yet to win any of the original 40 contracts from Petrobras since the end of last year. The analysts added the new yard should help level the playing field with Keppel Offshore & Marine, which set up a yard in Brazil six years ago.
DBS Vickers analyst Chong Wee Lee said SembMarine would not risk putting money into a Brazilian yard if it was not confident of winning contracts.
'SembMarine has a longstanding relationship with Petrobras. They have a good chance of getting contracts there and to some extent they may have been given some blessings from Petrobras,' he said.
Besides the offshore oil rigs, Petrobras is looking for shipyards to build a part of the hulls of eight floating production storage and offloading (FPSO) vessels, as well as a huge FPSO project - the P-62 - all in Brazil, Nomura analysts said.
Financing the Brazil yard should not be a problem. SembMarine expanded its multi-currency debt facility last month, from $500 million to $2 billion. A massive new yard at Tuas View in Singapore, with the 73.3ha first phase costing about $750 million, is being separately financed.
SembMarine said in a statement that details of the Brazil shipyard and capital expenditure plans would be 'announced separately at an appropriate time'. It added that engineering design for the new shipyard has commenced, with development and construction works to be undertaken in stages. The Straits Times understands the company is still waiting for an environmental licence which is expected to be granted within the next month.
Nomura analysts estimate that parts of the new Brazilian yard will be ready to build rigs by the third quarter of next year.
SembMarine president and chief executive Wong Weng Sun said the company has been a key player in Brazil since 1997, having delivered 11 units of oil and gas exploration, production and storage platforms for the oilfields there. 'These platforms produce more than half of Petrobras' daily two million barrels of oil output, this effectively making (Jurong Shipyard) the main contractor to Petrobras,' Mr Wong said.
SembMarine expects positive contributions to its earnings from the new yard eventually but it is not expected to have a material impact on its earnings and net tangible assets per share for the financial year ending on Dec 31. SembMarine shares closed 4 cents lower at $3.42 yesterday.