• Fri
  • Jul 11, 2014
  • Updated: 1:43pm

Rongsheng eyes US$800m deal to construct oil rigs

PUBLISHED : Saturday, 12 May, 2012, 12:00am
UPDATED : Saturday, 12 May, 2012, 12:00am

China Rongsheng Heavy Industries is set to make its first foray into the offshore-rig-building market with a deal potentially worth up to US$800 million from a Singapore-based company.

The mainland's largest private shipbuilder and PrimePoint Oil & Gas, an offshore hydrocarbons exploration firm, are in talks for the construction of up to four rigs.

Idar Iversen, chief executive and managing director of PrimePoint, said the two sides had agreed not to comment pending the release of a joint statement about the order.

Asked when this was likely to take place, he said: 'In about two weeks.'

A Rongsheng spokesman declined to comment.

The contract would involve the construction of a semi-submersible barge rig and a tender rig, plus options for more of both.

Iversen says the rigs will allow the company to move into a niche market that is currently 'controlled by one player with 60 per cent' market share.

He said the rigs would be 'used in the Southeast Asian marketplace', and deployed for drilling and production of oil and gas in 'shallow to deeper water'.

The rigs are expected to be delivered by mid-2014.

Jon Windham, Asian maritime analyst at Barclays Bank in Hong Kong, said: 'According to industry norms, the market value of the two contracted rigs would be in the range of US$300-400 million, and the construction would be relatively less [technically] demanding.'

Windham said that if the order was confirmed, it 'would mark Rongsheng's entry into the offshore segment and diversification from its core shipbuilding business, and would be positive to sentiment'.

PrimePoint will face competition from six other players in the barge-rig and tender-rig market, including the biggest operator, Seadrill, which is 23 per cent controlled by Norwegian-born shipping mogul John Fredriksen. Seadrill operates 16 tender rigs - specialised barges for drilling equipment - including nine in the Asia-Pacific region, with four more on order.

Speaking at a recent conference, Alf Thorkildsen, Seadrill's chief executive, said the main operating areas for tender rigs were Southeast Asia and West Africa, although the market was expanding to Central and South America. Recent charter rates for tender rigs vary between US$170,000 and US$235,000 a day. Seadrill ordered its fourth tender rig last month from Cosco Nantong Shipyard for delivery by the end of next year.

Thorkildsen said rig orders from mainland shipyards could benefit from export credit financing.

Rongsheng has targeted the offshore sector to offset a downturn in traditional shipbuilding caused by overcapacity and weak charter markets. Chen Qiang, the Jiangsu shipbuilder's chief executive, said the firm was creating an offshore engineering centre to focus on the fabrication of higher-value ships, including production and oil-storage units.

The shipbuilder completed a deepwater-pipe-laying crane vessel in collaboration with China National Offshore Oil Corporation last year.

Industry experts said mainland shipyards were set to take an increasing share of the offshore-vessel-construction market as high oil prices spurred offshore oil and gas exploration in Asia.

Abhishek Pandey, from Standard Chartered Bank, said operators were fuelling demand for Chinese shipyards to build offshore vessels ranging in size from offshore support vessels to drilling rigs.

6

Number of years it took to build China's largest deepwater oil-drilling rig, Ocean Oil 981, which came online this year

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