Ramunia gears up for more deepwater deals
The Star
30 April 2007

PREPARATIONS for deepwater oil field projects are well underway in the oil and gas (O&G) industry, and that is no different for Ramunia Holdings Bhd. 

Ramunia, which owns the country's largest fabrication yard, is investing to upgrade and automate its fabrication yard in Teluk Ramunia ahead of what it anticipates will be a flood of fresh jobs for deepwater projects. 

“The work done today at yards is a reflection of decisions made two or three years ago. Exploration now when oil prices are at around US$60 a barrel has been heightened.  

“We will see these contracts coming out in two to three years,'' director of finance Mohamad Reezal Siddiq told StarBiz. 

Ramunia has an orderbook of RM1.4bil. The company is bidding for RM9bil worth of new jobs, of which RM3.5bil is local and RM5.5bil international, and has a strike rate of 20% to 25%. 

It is also preparing to bid for RM5bil worth of local jobs. Identified international jobs for upcoming bids are at RM150mil but the company believes the tight supply in the industry would see international giants sub-contracting work to yards such as Ramunia's. 

But what the prize fabricators and the entire O&G industry are waiting for is the move into deepwater projects, and indications are that the amount of contracts for that is going to be huge. 

Ramunia estimates that upcoming local deepwater projects with proven oil reserves or under further exploration would amount to RM42bil.  

The potential from deepwater blocks under field study is a further RM30.5bil, pushing the combined total of contracts from deepwater projects to RM72.5bil from now to 2010. 

The RM72.5bil would encompass the entire engineering, procurement, construction, installation and commissioning (EPCIC) sphere. Fabrication work, Mohamad Reezal said, was generally about 20% of that total.  

“The industry over the next five years will be in a comfortable position,'' he said. 

With the knowledge and expectation of a massive inflow of jobs, the main Petronas-licensed fabricators in the country are all expanding their yards. 

With the industry split between the big three yards – which consists of Ramunia, MISC-owned Malaysia Marine and Heavy Duty Engineering Sdn Bhd and Sime Engineering Services Bhd – and four smaller players, Mohamad Reezal believes tight capacity and huge demand will work in Ramunia's favour. 

“The reason I am stressing on capacity is because it allows us to aggressively bid in a period of supply constraints. Having the capacity makes us competitive,'' he said. 

With the fabrication yard running at about 50% capacity, Ramunia is making the necessary investment to ensure that its yard is ready by mid-2008 to accept the deepwater projects.  

To prepare for this, it is investing RM362.4mil to buy the middle yard at its Teluk Ramunia complex, purchase new machinery, build new structures and for working capital. 

Upgrading work has started and components for deep water will be ready in six months. 

Deepwater fabrication projects are about four or five times more expensive that the shallow water equivalent, and the cost for each would be RM800mil to RM1bil. 

Mohamad Reezal said Ramunia was going to automate a lot of its processes for efficiency gains and to catch up with the major Singaporean and Korean shipyards that are considered to be 10 and 20 years ahead. 

Once complete, Ramunia, which will also dredge the depth of its sea front to 12 metres for deepwater projects, aims to handle fabrication work of 20,000 tonne platforms and get the much larger topside business. 

“What we have done is also to have an international push for management, to move the company to an international standard,'' Mohamad Reezal said. 

To prepare for international standards, the company has appointed former founder of Hyundai Heavy Industries (HHI) offshore and engineering division Dr Daniel Ahn Chung-Sung as executive director. 

Dr Ahn was the president of HHI in charge of offshore engineering and industrial plant division prior to joining Ramunia. 

“We need a lot of experience in engineering, procurement, project management and if we want to be competitive in the deepwater with the Samsungs and Hyundais, we need to bring in a different set of talent. 

“That’s where Dr Ahn comes in. He has the ability to attract international players to join Ramunia and put us in good stead,'' said Mohamad Reezal. 

Upgrading also means replacing labour with machinery, which will allow the company to have better quality products and cut down on manpower and labour requirements.  

It is also important as the oil majors, especially the US companies, pay close attention to injuries at the workplace. 

Currently, Mohamad Reezal said internal margins were about 17% and hoped it would rise to 20% once the upgrading of yard and expansion is complete. 

“By moving up the value chain and by being able to do bigger structures, we will not be competing with the masses. 

“If you go past 15,000 tonnes, you are joining a handful of players in Asia. That is where we want to position Ramunia,'' he said.