Technics Wins FPSO Award

Technics Offshore Engineering has sealed its first contract with BW Pioneer Ltd (c/o BW Offshore as an agent).

Oslo Stock Exchange-listed BW Offshore builds, owns and operates oil and gas floating, production, storage and offloading ("FPSO") vessels. It is one of the world’s leading FPSO contractors, backed by 25 years’ experience and a track record of 12 successfully delivered FPSO projects and assets operating in Mexico, Nigeria, Mauritania, Malaysia and Russia.

The main contract amounts to S$17.0 million and encompasses the overall design of the process engineering, detailed engineering and calculations, procurement of major equipment and fabrication /construction (i.e., "EPCC Basis"), for two modules of gas compression systems and one unit of gas treatment and processing module.

Each gas compression system will feature a premier 4,400 horsepower compressor by US manufacturer Ariel Inc., for which Technics has been qualified as an authorized packager since 2005, 4,400 horsepower electric motor, cooler, associated gas scrubbing and processing vessels, including PLC controls and instrumentation. When fully constructed, each gas compression module will tower over 15 meters in height and weigh over 300 tonnes.

Technics also offered a separate option worth S$1.5 million for the provision of supplementary works and supplies of parts, which BW Offshore is likely to take up later.

This contract is in conjunction with BW Offshore confirming its first contract with Petrobras America Inc. for the conversion, installation and operation of an FPSO at Chinook Cascade oil fields for up to 8 years, including option periods of up to 3 years.

The two gas compression modules to be built by Technics will be installed onboard this landmark FPSO by BW Offshore for gas vapor recovery and gas export applications, with the gas treatment and processing module for gas dehydration application.

The FPSO will be installed in Gulf of Mexico – its water depth of 2,600 meters is probably the deepest water depth an FPSO ever has been installed on to-date. Storage capacity is about 600,000 barrels of oil, with process capacity of 80,000 barrels of oil per day and gas export facilities of 16 million standard cubic feet per day. Earlier in June 2007, BW Offshore delivered the first FPSO ever in the Gulf of Mexico to Mexican state-owned oil company, Pemex.

Commenting on Technics’ latest contract win, Founder and Group Managing Director Mr. Robin Ting said, "We are proud to be participating in BW Offshore’s milestone FPSO project bound for the Gulf of Mexico. This will mark a new operating frontier for Technics’ gas compression systems and topside process equipment. As this project is also of significance to BW Offshore’s track record, the confidence BW Offshore has placed in Technics strongly attests to our strategy of investing in enhancing our yard facilities and in-house design and engineering team."

In January 2007, Technics established a new track record for "monster" gas compression systems catering to the stringent requirements of FPSOs operating in rough waters. The Group timely delivered two of its largest gas compression systems to date, each equipped with a 4,800 horsepower Ariel compressor, for Prosafe’s Tui FPSO, the sole FPSO operating off New Zealand.

"We look forward to forging a good working relationship with BW Offshore similar to our long-term strategic alliance with Prosafe. This endorsement by another leading FPSO player is an excellent head start for our new FY2008 and will strengthen our track record amongst MNC oil and gas players. Closer to this region, the demand for oil and gas FPSOs will be robust as FPSO remains amongst the most viable production solutions to tap the many marginal deepwater oil and gas fields discovered throughout South-east Asia and India," said Mr. Ting.

Technics continues to position for growth and is awaiting the approval of expansion plans for its Singapore yard in FY2008/09. Topside process modules will become taller in structure to fit the shrinking footprint of smaller-size existing tankers available for conversion into FPSOs. Building its own jetty onsite will ensure more efficient and cost-effective delivery of huge completed modules to customers’ barges, without tidal issues. In-house sandblasting facilities will eliminate logistical costs and hassles in transporting to sub-contractors. These factors will emerge as the winning edge in pursuing more large-scale FPSO projects.

"Our gas compression systems will be required for various key applications in both oil and gas fields. The only aspects holding back our pace of growth are the delays in the timing of oil and gas majors’ awarding of main contracts to FPSO players, and the long order lead-time for highly sought-after components with customers preferring to wait up to 50+weeks. Such external factors had impacted Technics’ project schedules in FY2007," concluded Mr. Ting.

The delivery for all three modules is February 2009 on a FOB basis to BW Offshore’s crane barge arriving at Technics’ waterfront yard in Singapore. Accordingly, the Group expects to start progressive recognition of revenue accruing to the above contract based on percentage of completion basis. This will not amount to any material impact on the earnings per share and net tangible assets of the Company for FY2008, as the substantial portion will be recognized in FY2009.

None of the directors or substantial shareholders of the Company have any interest, direct or indirect, in the aforesaid transaction.

Submitted by Mr. Ting Yew Sue, Director to SGX on 11 October 2007.