04/21/2017 | Press release | Distributed by Public on 04/20/2017 21:56
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Thursday, April 20, 2017 - 18:42
FEDERAL International said on Thursday that it has signed a memorandum of understanding with China Merchants Industry Holdings (CMIH) to cooperate exclusively on oil and gas projects in Indonesia. PHOTO: BLOOMBERG
FEDERAL International said on Thursday that it has signed a memorandum of understanding with China Merchants Industry Holdings (CMIH) to cooperate exclusively on oil and gas projects in Indonesia.
Federal is a mainboard-listed service provider in the oil and gas, energy, utilities and infrastructure industries.
CMIH is a wholly owned subsidiary of the China Merchants Group, a state-owned China conglomerate headquartered in Hong Kong that is engaged in businesses including energy, transportation, marine engineering, �nance, and real estate.
Federal added that the company and CMIH are currently in talks with various Indonesian parties on a number of identi�ed projects. SEE ALSO: Federal teams up with China Merchant unit to bid for O&G projects in Indonesia
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Friday, April 21, 2017 - 05:50
Mr Koh says with the MOU in place, Federal will now be able to lean on the ២�nancial muscle of China Merchants Industry Holdings. FILE PHOTO
OILFIELD services provider Federal International (2000) and China Merchants Industry Holdings Co (CMIH) are teaming up to bid for oil and gas (O&G) projects in Indonesia.
Federal announced after trading closed that a memorandum of understanding (MOU) was signed with CMIH on Thursday, detailing the cooperation for the Indonesian O&G market.
Federal's executive chairman KK Koh told The Business Times that the signing of the MOU has taken place at a juncture when Indonesia's O&G contracting is about to pick up.
Despite the uptick, Mr Koh acknowledged that it remains challenging to raise project ២�nancing two years into a protracted sectorial downturn.
But with the MOU in place, Mr Koh said Federal will now be able to lean on the ២�nancial muscle of CMIH. He added that the pair have already identi២�ed speci២�c projects for their joint bids in Indonesia.
CMIH is a wholly owned yard-operating subsidiary of China Merchants Group, which had over 900 billion yuan (S$183 billion) in assets as at end-2015.
The yard-operating unit owns three production bases, two in China and one in Hong Kong, that have experience in designing and constructing o៌�shore drilling units, ship repairs and conversions.
Vice-president David Zhu, who is also the chairman of Yiu Lian Dockyards, said Indonesia's O&G market holds "interesting opportunities for CMIH".
He added that CMIH is looking to tap Federal's network in Indonesia to grow its presence in the resource-rich South-east Asian country.
For CMIH, a tie-up with Federal will go the extra mile in meeting the increasingly stringent local content requirements for Indonesian O&G projects.
Federal's Cilegon-based associate Gunanusa Utama Fabricators has already established a track record in delivering large o៌�shore production structures.
Beyond these upstream O&G production structures, BT understands the newly established partnership has also set its sight on the growing market for lique២�ed natural gas infrastructure in Indonesia.
But for a start, the partners can look forward to several tenders for ២�oating production or storage structures already in the pipeline.
IHS principal researcher Kelvin Sam ២�agged a leased ២�oating production unit destined for Husky Energy's MDA-MBH gas ២�eld development in Indonesia as among those expected to be awarded this year in the segment.
He also noted several ២�oating storage o៨�oading (FSO) vessels may be ordered in 2017 as Indonesian O&G operators look into replacing and maintaining infrastructure in producing oil and gas ២�elds.
"Demand for these replacement Indonesian FSOs is more resilient to oil price volatility as it relates to the upkeep of existing production facilities, which are crucial to the ២�eld operators for the purpose of maintaining cash ២�ows," he said.
Indonesia's O&G contracting is likely to bene២�t from visibly improving and stabilising oil prices, though an observed lack of ២�scal certainty has not helped in promoting con២�dence among foreign investors.
Mr Koh argued that such political overhang will gradually recede now that the Jakarta governor election is done and dusted.
Wood Mackenzie's research director Andrew Harwood also noted a greater urgency has emerged for Indonesia to improve the clarity of its O&G regulations as a result of "recent changes to its ២�scal system".
But Mr Harwood said "very little progress" has been made in passing an updated O&G law, which looks unlikely to be ២�nalised this year.
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