When delivered at the end of the first quarter of 2010, the KFELS N Class rig will be the largest jackup rig ever to be built in Singapore. It will also be among the world's largest jackup rigs to be constructed for the North Sea.
Under the agreement, Keppel will have a 10% equity stake in the rig.
The KFELS N Class rig is the brainchild of Keppel's R&D arm, Offshore Technology Development, following Keppel's extensive experience in constructing rigs for the North Sea region since 1985.
The KFELS N Class design provides customers the flexibility of having a jackup unit that can undertake drilling and production activities concurrently. This state-of-the-art jackup drilling rig will have features that readily accept process modules for production activities.
Said Mr. Choo Chiau Beng, Chairman & CEO of Keppel O&M, "This is our second major partnership with a trend-setting customer to develop and build new products to meet the rising needs of the oil and gas industry.
"Three years ago, when we first co-operated with the Skeie Group, the offshore market was still lackluster. Their market foresight and entrepreneurial spirit in searching for innovative solutions in challenging conditions has encouraged us at that time to develop and design the KFELS Super B Class jackup rig that can drill in deeper depths at higher temperature and pressure.
"We have since delivered two of five KFELS Super Bs, the Deep Driller 2 and Deep Driller 3, ahead of schedule to the highly satisfied customer.
"About a year ago, Keppel saw opportunities arising from the Norwegian North Sea sector. At the same time, the Skeie Group was also on the lookout for an innovative rig for the marginal fields in the North Sea. Our R&D arm assessed this demanding and technically challenging requirement and worked with Skeie Group to develop this innovative KFELS N Class self-elevating jackup solution."
The North Sea region is one of the world's harshest operating environments for offshore exploration and production, and comprises numerous marginal fields, each having relatively limited oil and gas reserves. Yet together, these fields contain Western Europe's largest oil and natural gas reserves, and is one of the world's key non-OPEC producing regions.
The KFELS N Class is suited for operation in harsh weather conditions, and with water depths of up to 400 feet and drilling depths of down to 35,000 feet. The design is in full compliance with the demanding and technical challenging requirements of rigs operating in the Norwegian sector of the North Sea. None of the jackup rigs on order today are specifically designed to meet these requirements.
Mr. Choo continued, "The difficult weather and field conditions of the North Sea call for an innovative offshore rig solution that can maximize functionality in order to make searching and producing hydrocarbons in the marginal fields more time and cost effective. Our new KFELS N Class drilling rig has been created to meet this need.
"The KFELS N Class rig has the KFELS Super B deep-well drilling capabilities and has sufficient deck space for production modules to be outfitted. The design of the rig allows it to undertake production activities without compromising the rig's drilling capability.
"Keppel's decision to have an equity stake in the rig demonstrates our confidence in the KFELS N Class design, as well as the current jackup rig market. We believe that the design is a technically advanced rig that can meet the needs of customers operating in harsh offshore environments."
Mr. Bjarne Skeie, Chairman of Skeie Group, said "New technologies and more innovative rig designs are making development of marginal fields in the North Sea commercially viable. We are glad to be able to engage Keppel Offshore & Marine right from the on-start of our concept development.
"Our partnership with Keppel has borne fruit in the development of the KFELS N Class rig, which we believe will set new benchmarks for the next generation of jackup rigs. This rig can drill deeper and drill more wells, with easily added on production functions.
"Keppel FELS' ability to develop innovative solutions and to consistently deliver on its promise through excellent project execution in the current tight construction capacity situation makes them second to none in their market."
Keppel FELS is a wholly-owned subsidiary of Keppel Corporation, through Keppel Offshore & Marine, a leader in offshore rigs, ship repair and conversion and specialized shipbuilding. Keppel O&M's near market, near customer strategy is bolstered by a global network of 17 yards in the Asia Pacific, Gulf of Mexico, Brazil, the Caspian Sea, Middle East and the North Sea regions. Integrating the experience and expertise of its yards worldwide, the group aims to be the provider of choice and partner in solutions for the offshore and marine industry.
The contract is not expected to have any material impact on the net tangible assets or earnings per share of Keppel Corporation for the financial year ending December 31, 2007.
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