Malaysia's Coastal Contracts Bullish on Entry into Indonesia's LNG Market

Coastal Contracts Bhd, a Malaysian offshore support vessels (OSV) fabricator, is optimistic about its impending entry into Indonesia's liquefied natural gas (LNG) market following the expected conclusion of a purchase of 49 percent stake in locally incorporated PT Jaya Samudra Karunia Gas (JSK Gas) in the fourth quarter of 2016 (4Q 2016) for approximately $20.8 million.

The acquisition of JSK Gas is part of Coastal Contracts' diversification strategy in a low oil price environment which has negatively impacted the latter's core OSV fabrication and charter business.

Coastal Contracts, which entered into a Memorandum of Understanding (MOU) July 30 with JSK Gas and various vendors to formalize the acquisition, expects to have joint control over JSK Gas’ operating subsidiaries and assets that are primarily focused on LNG regasification and storage services.

"We are now in the midst of expanding our reach into the highly promising Indonesian LNG market with a well-established local partner. Both parties are committed towards this venture, and we remain on track to complete the transaction in 4Q 2016," Ng Chin Heng, Coastal Contracts executive chairman said in the press release.

"With its completion, we stand to further strengthen our income stream and build our expertise in a new high-growth venture, effectively reducing the Group’s reliance on our traditional markets of OSV fabrication and charter," Ng added.

JSK Gas, through its 99 percent owned unit PT Benoa Gas Terminal (BGT), would be involved in the operations and transfer of a Floating LNG Regasification Unit (FRU) over a 5 year contract period. Under the deal, BGT would be involved in the production of regasified natural gas for PT Pelindo Energy Logistik (PEL), with the gas supplied to a state-owned gas-fired power plant in Bali, Indonesia.

In addition, JSK Gas, through BGT’s 99 percent owned subsidiary PT Jaya Transportasi LNG (JTL), has a 10 year charter contract with the same counterparty to build and operate a Floating LNG Storage Unit (FSU), with optional extension of another 13 years. The FSU would receive and store LNG before it is transferred to the FRU for regasification.

Chee Yew has covered the upstream and downstream sectors of the oil and gas industry in Asia for more than 15 years. Email Chee Yew at cheeyew.cheang@rigzone.com

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