Why Singapore rig builders should be unfazed by Vard's Brazil disaster

Experience offers an edge.

CIMB said that while the overheated environment has made it even more challenging to operate in Brazil, it believes that Vard’s Brazilian issues are also somewhat company-specific – its Niteroi yard is too limited to handle its numerous large-vessel orders.

A better understanding of the root causes for Vard’s problems has assuaged CIMB's fears that the Singapore rigbuilders could face similar execution blow-ups.

Here's more:

We believe that the market has under-appreciated Singapore rigbuilders’ operational track record in Brazil.

Additionally, Keppel has been consciously investing in its BrasFel yards in Angra dos Reis (in the state of Rio de Janerio)over the past few years to keep pace with higher demand requirements; while SembMarine is developing a greenfield yard in the state of Espirito Santo to meet Petrobras’s local content requirements.

Experience offers an advantage
Both Keppel and SembMarine have operated in Brazil and delivered projects for Petrobras over the last 10 over years.

Keppel, in particular, was one of the early movers to lead the shift in local content in Brazil.

In 2000, it embarked on the joint leasing of its BrasFELS yard in Angra dos Reis with Brazilian engineering firm, PEM Setal. Keppel assumed full control of the yard in 2005 and has delivered over 10 projects, directly or indirectly, for Petrobras.

Not including FPSO conversions, BrasFELS has successfully constructed and delivered three major P-51, P-52 and P-56 semi-production units. The contract value of these three units amount to US$2.6bn. 

More importantly, the P-51 and P-52 are the first two units (for Keppel) which need to comply with the 60% local content requirement. Keppel managed to build these units with more than 70% local content.

Furthermore, thanks to the experience gleaned from building the P-51 and P-52, Keppel was able to deliver the P-56 unit within 42 months. The production of P-56 started in Aug 2011.

In comparison, the production of the P-55 semi-production unit, which was contracted to two local companies (construction of lower hull by Estaleiro Atlantico Sul; construction of deck, topside and integration by Quip consortium), has not yet commenced, even though the contract was awarded around the same time as P-56 (this unit was contracted almost six years ago).

SembMarine’s working experience in Brazil is through partner yards in the state of Rio de Janerio, namely Maua (tie-up in 2001) and Mac Laren (tie-up in 2008).

Unlike Keppel, SembMarine’s work scope mainly revolves around FPSO conversions. Hull conversions are usually done in Singapore while the construction of topside and integration works are carried outin Brazil.

In recent years, the SembMarine/Maua consortium has worked on the P-50 and P-54 FPSO projects as well as the PXML-1 fixed platform.