Ramunia forays into rig-building
New Straits Times(BizNews)
16 September 2006

Malaysian oil-services firm Ramunia Holdings Bhd is in talks to sell semi-submersible drilling rigs to European buyers in potential orders worth more than US$1 billion (RM3.67 billion), the company’s chairman said on Thursday.

Semi-submersibles can cost US$500 million (RM1.8 billion) to around US$1 billion (RM3.67 billion) each and are used in deep water, moored above the oil well rather than fixed to the sea floor. They are much more expensive than conventional offshore rigs,

No Malaysian company has ever built a semi-submersible rig.

An order for Ramunia would put it in competition with some of the top offshore rig-builders such as Singapore’s Keppel Corp and Semb Corp Marine and South Korea’s Samsung Heavy Industries and Daewoo Shipbuilding.

“We are already in talks and we could get something soon,” Chairman Datuk Azizul Rahman said in an interview. He declined to say how many orders were in the pipeline.

Ramunia is negotiating with two European drilling contractors, companies that own drilling rigs and rent them out for exploration and production of oil at sea, Azizul said.

“Going forward within the next two to three years we will also be looking at the FPSO (floating production, storage and offloading) market,” he added.

Azizul said his yard did not have a dry or floating dock but could do the more complex topside and retrofitting works, while the more labour-intensive work of building hulls of FPSO vessels or semi-submersible rigs could be outsourced to yards in China.

Ramunia expects approval to buy new yard space next to its existing yards in Southern Johor state by January 2007.

Leading Ramunia’s deep-water ambitions is Daniel Ahn, a 30-year veteran of Hyundai Heavy Industries who joined the company last year to head its international operations.

Rising oil prices have resulted in a surge in exploration activities in South-East Asia and across the world, with Malaysia alone expected to develop at least 10 new deep-water fields off Sabah and Sarawak.

Malaysia is a major non-Opec (Organisation of Petroleum Exporting Countries) oil producer and pumps around 700,000 barrels of crude per day.

Drilling firms are scrambling to upgrade their old assets or build new offshore drilling rigs and vessels, creating a shortage in yard space and equipment used for build these huge structures.

Azizul said Ramunia had a good chance of quickly filling its new yard space, which would make it the country’s top and Asia’s second-largest yard in terms of steel-fabrication capacity.

The new space would double Ramunia’s fabrication capacity to 60,000 tonnes a year and an upgrade of existing facilities would add another 20,000 tonnes of capacity by 2008.

“That will place us just behind Hyundai’s fabrication yard in Ulsan, South Korea,” Azizul said, adding the expansion would cost RM335 million and could boost revenues “exponentially”.

Ramunia plan to venture out of Malaysia and bid for longer offshore structures like fixed and floating oil-and-gas production platforms and semi-submersible rigs.

It has orders worth just RM650 million in mostly small offshore engineering and services jobs, but is now bidding for RM5.3 billion in new work, including a US$460 million (RM1.6 billion) central-processing platform in the Gulf of Thailand and fabrication of well-head structures off India, Azizul said.

It plans to bid for another RM12 billion in orders next year, he added.

Standard & Poor’s Equity Research has forecast a 70 per cent jump in Ramunia’s revenues in the year to October 2006 and a net profit of RM30.5 million. In 2004/05, costs from a major restructuring pushed it into a loss of RM27.1 million.

Ramunia shares last traded at RM1.13, up 6.5 per cent this year, in line with the wider market. It is thinly traded and currently fletches 11 times S&P’s 2005/06 forecast, compared with 16 times for Keppel and 35 times for Daewoo Ship-building. Reuters.