Vietnam's Services Firms Look Overseas as Growth Slows at Home

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Slow growth at home is encouraging Vietnamese petroleum service companies to seek business opportunities overseas.

Vietnam’s firms servicing the domestic offshore upstream petroleum sector eye business opportunities overseas as growth opportunities in the country slows. Companies now embarking on this path include those in the drilling and construction sectors.

The few local firms venturing into foreign markets are offshoots of national oil and gas firm Vietnam Oil and Gas Group, or PetroVietnam. One of these is PV Drilling & Well Services Corp. (PV Drilling), a firm listed on Vietnam’s Ho Chi Minh stock exchange in which PetroVietnam has just over 50 percent interest. PV Drilling’s primary business is in the provision of drilling and drilling related services.

Another company to have made a push beyond the domestic market is PetroVietnam Technical Services Corp. Mechanical and Construction (PTSC M&C). The firm focuses on fabrication, transportation, hook up, installation and commissioning projects for onshore and offshore oil and gas structures as well as equipment.

PetroVietnam Marine Shipyard Joint Stock Company (PV Shipyard), a PetroVietnam subsidiary of PetroVietnam, is the latest to eye foreign business opportunities. Established in 2007, PV Shipyard is an engineering, procurement and construction (EPC) contractor focused on newbuild jackups and liftboats as well as the provision of rig upgrades, conversion and repair.

PV Drilling Harbors Expansion Hopes

PV Drilling, set up in 2001, currently has over 50 percent share of Vietnam’s drilling market. It operates and fully owns three offshore jackups – PV Drilling I (300’ ILC), PV Drilling II (400’ ILC) and PV Drilling III (400’ ILC) – and the PV Drilling 11 land rig. The firm also owns 62 percent of the semisubmersible tender assist drilling rig PV Drilling V.

“PV Drilling is going to expand its operation to … deepwater areas and overseas market to contribute more to exploration and production of oil and gas resources for Vietnam and the world,” the company stated in its website.

All three jackups and PV Drilling V are presently operating in Vietnamese waters, while PV Drilling 11 is working in Algeria at the MOM-3 oil and gas field, which is jointly operated by PetroVietnam’s upstream unit PetroVietnam Exploration and Production Corp. (PVEP).

As an extension of its global growth strategy, the firm expanded its supply of manpower, mud logging and other well technical services to PVEP Overseas in Myanmar last year, PV Drilling said in its 2013 business performance report and its 2014 business plan which were submitted to the company’s annual general meeting in April. PV Drilling also set up a representative office in Malaysia to support its expansion overseas.

In addition, PV Drilling formed a joint venture (JV) in Singapore named PVD Overseas to operate PV Drilling VI (400’ ILC), a newbuild jackup which is currently under construction at Keppel FELS shipyard in Tuas, Singapore. The jackup, costing $210 million, is scheduled to join PV Drilling’s fleet next February.

“The rig pipeline from the Singaporean JV can be expanded until the horizon of 2017 to seize the bright opportunity of the drilling market. This material step will help to realize our goal to provide offshore drilling rigs in Southeast Asia region,” PV Drilling President and CEO Pham Tien Dung told Vietnam Investment Review in an interview last December.

“This area has huge opportunities with a vast oil and gas potential and robust outlooks for exploration and production activities. This is feasible for our sustainable development based on a sound cost-benefit analysis. In the longer term, larger markets like the Middle East and the Gulf of Mexico are our ultimate targets,” Pham added.

PV Drilling has a 55 percent share in PVD Overseas, with Joy Pride Investments Ltd. – a subsidiary of Singapore’s Keppel Corporation – holding 35 percent stake, while another Singaporean firm Falcon Energy Group Ltd. has the remaining 10 percent. 

On PV Drilling VI, industry watchers believed the jackup may already have an assignment. Given its costs “over $200 million … there must some memorandum of understanding for the jackup when it becomes operational,” Nyugen Thi Than Thuy, a Hanoi-based analyst with SSI Securities Services’ Institutional Research & Investment Advisory told Rigzone.

Separately, PV Drilling indicated at the Offshore Technology Conference Asia (OTC Asia) in Kuala Lumpur, Malaysia in March that the company intends to add a jackup and a semisubmersible tender assist drilling rig to its drilling fleet, according to Pham, with a decision on the fleet expansion still pending.

PTSC M&C Builds Momentum

PTSC M&C made its breakthrough overseas early last year when it won a fabrication deal from India’s AFCONS Infrastructure Ltd. – which led a consortium that bagged a $290 million engineering, procurement, commissioning and installation (EPCI) from Oil and Natural Gas Corp. for the Heera Redevelopment Project offshore India’s west coast. The firm’s workscope covers the procurement of bulk items and fabrication of an 8,500-ton Heera topsides, with the project scheduled to be completed later this year.

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In February, PTSC M&C was awarded a $130 million platform engineering, procurement, construction and commissioning contract by Total E&P Borneo B.V. for the Maharaja Lela South Project offshore Brunei. The contractor will carry out work on the 1,500 ton topsides and 1,150 pile at its Vung Tau yard in Vietnam, with delivery planned for mid-2015.

PTSC’s ventures beyond domestic shores to “targeted markets in Asia such as Myanmar, Malaysia, Thailand and Brunei … is to increase our market share and accordingly help sustain our business,” a PTSC M&C executive told Rigzone.

“Our recent participation in foreign projects will help enhance our capability and competitive edge … Accordingly, we will gain a stronger foothold in the regional market … Currently we are budding for some projects in Malaysia, Myanmar and India,” the company source added. 

PTSC appears equipped with sufficient yard capacity to cope with potential orders placed for foreign projects. The Vietnamese firm currently has a 56.8 acre (23 hectare) fabrication yard equipped two skid-ways able to accommodate 10,000, 20,000 and 25,000 ton structures. It also has two 550-metric ton cranes and a covered workshop enabling the firm to fabricate topsides in all weather conditions.

“In addition, we are able to utilize our sister companies’ fabrication yards subject to project requirements. This can bring our total yard area to more than 321.2 acres [130 hectares],” the PTSC executive added.

Manpower-wise, PTSC M&C conducts various courses annually to train its workforce, including engineers, under the watchful eye of experienced and internationally qualified supervisors at the firms’ fabrication yards.

PV Shipyard Seeks Overseas Business Too

Just like PV Drilling and PTSC M&C, PV Shipyard has trained its sight on overseas business to generate more revenue for the firm. The company’s yard, which occupies an area of 34.6 acres, is located at Sao Mai in Ben Dinh port, Vung Tau. Fabrication capacity at the yard is around 40,000 metric tons per year.

In this regard, PV Shipyard formed a partnership with Semco Maritime Joint Stock Company, a subsidiary of Denmark's Semco Maritime A/S, to repair, refurbish and upgrade rigs in Vietnam for domestic and foreign rig operators and owners in Southeast Asia. They established a new company Vung Tau Rig Services for this purpose.

The new joint venture hopes to capitalize on the bright outlook for upgrades in the Southeast Asian offshore rig market. PV Shipyard and Semco Maritime have worked together since 2012, with both successfully completing two major rig upgrades last year.

Given the presence of around 25 rigs currently operating in Vietnamese waters, access to upgrades in nearby Vietnam will appeal to rig owners who will now have an alternative to moving their rigs to Singapore for upgrading works.

“This saves both time and money and the new Vung Tau Rig Services has already identified quay facilities to allow for upgrades of even larger rigs than now,” Semco Maritime said in a press release.

PV Shipyard certainly hopes to become a major regional player, albeit through a joint venture, in the rig services market.

“We welcome Semco Maritime in our house and as a trusted partner. We unite our competences, enabling us to meet our common goal – to become a leading rig service specialist in Asia. We are proud to generate more jobs to local supply chain as well as providing skilled specialists,” PV Shipyard’s Managing Director Phan Tu Giang said in the same press statement.

In the short to medium term, Vietnamese offshore firms serving the upstream oil and gas industry may focus more on overseas markets as domestic opportunities appeared relatively limited, for now.

However this might change in the longer term as exploration activities could increase because Vietnam's waters remain relatively underexplored. And if such exploration activity turns out to be successful, field development work could translate into more businesses for these Vietnamese offshore services companies. After all, Vietnam is currently the third largest holder of crude oil reserves in Asia, behind China and India, according to the U.S. Energy Information Administration.



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