Keppel Corp

Keppel Corp: Golar LNG has signed a pact with Keppel Shipyard to develop its first floating liquefied natural gas vessel (FLNGV) by converting 1 of its existing Moss LNG carriers. Keppel has previously converted 3 other LNG into Floating Storage and Regasification Units (FSRU) for Golar in 2007 (Golar Spirit), 2009 (Golar Winter) and 2010 (Golar Freeze). The FLNGV will have a capacity of up to 2m tpa and conversion work is expected to start around mid-2013 and ready for production by 1Q15. Golar retains the option to convert 2 additional vessels with Keppel under the same deal. No financial details of the conversion contract have been disclosed but the cost of new vessels can be staggering. This contract could potentially represent a new growth branch for Keppel, which has long dominated the FPSO conversion space, and is well poised to capitalize on the anticipated proliferation of floating LNG facilities off Australia as onshore projects face delays and cost overruns. Currently Samsung has won a contract to construct a 2m tpa FLNGV for InterOil Corp, while a Technip/Samsung team is building a ~US$12b FLNG facility for Shell’s Prelude project in offshore Western Australia and a Technip/Daewoo group has been awarded a FLNG unit by Petronas. Meantime, Ensco sees greater Asia and Australia demand for deepwater rigs in 2013 and strong market in Gulf for premium jack-up rigs with 4Q dayrates higher than 3Q. Ensco is a major customer of Keppel, have ordered 6 ultra deepwater semi-submersible rigs, of which 5 have been delivered. The latest news may breathe new life to Keppel’s share price, which has taken quite a beating lately on concerns over its over-reliance on the jack-up rig orders, which may result in empty slots once these are delivered.