Keppel Bags $600M FLNG Conversion Deal with Golar LNG

Singapore's Keppel Corp. – the world's largest oil rig builder – has entered into a term sheet agreement with Norway's Golar LNG to work on the conversion of up to three liquefied natural gas (LNG) vessels into Floating LNG (FLNG) vessels, Keppel Corp. said Monday in a statement.

Local media estimated that the deal is worth $600 million. Keppel Corp. acknowledged the published figure in its statement, but it did not confirm or refute the figure.

The term sheet agreement requires Keppel Shipyard to start on a front-end engineering and design (FEED) study to confirm the engineering and work scope.

Upon completion of the FEED study, Keppel Shipyard will proceed to work with Golar LNG on the conversion and engineering on the first of the three LNG vessels. Golar LNG retains the option to convert the other two LNG vessels at a later date.

In an opinion statement, Maybank Kim Eng investment analyst Yeak Chee Keong told Rigzone Monday that the contract amount can only be accurately ascertained after Keppel Corp. completes required studies on the project.

"This project win is a positive for Keppel Corp.," Yeak noted.

Keppel Corp. revealed Oct. 18 that its 3Q 2012 net profit fell 15 percent year-on-year to $283 million (SDG 346 million) amid rising competition from Chinese shipbuilders and lower-margin projects.

Keppel Corp. has seen stiff competition from Chinese shipyards including the likes of Cosco Corp. Singapore and Rongsheng Heavy Industries Group. These Chinese companies are targeting the offshore rig sector because of a collapse in demand for dry-bulk vessels, their traditional focus.

Keppel Offshore & Marine (Keppel O&M) – the offshore and marine division of Keppel Corp. – has won $7.2 billion (SDG 8.8 billion) of new orders this year, taking its book order to $10.7 billion (SDG 13.1 billion), with deliveries stretching up to 2019. Keppel Shipyard is a unit of Keppel O&M.


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