New technology making a name for oil & gas supply company

While investors may view oil and gas technology solutions provider Perisai Petroleum Teknologi Bhd with some amount of scepticism due to past mishaps, one certainly cannot fault them for their steadfast ability to pick themselves up from the pieces and forge ahead.

Nagendran Nadarajah ... ‘The MOPSU is going to be a game changer.’

In June this year, Perisai went up the value chain when it shifted to the main board of Bursa Malaysia from its Mesdaq status.

To further mark its hunger for innovation as emblematic, Perisai recently featured its new logo, a bright orange phoenix rising from the ashes – perhaps best signifying rebirth and constant evolution.

This new logo was timely, considering that just last week, Perisai was awarded the “Excellence in Innovation” award by Frost & Sullivan.

The award was for recognition of Perisai’s potential contribution to the development of marginal and uneconomical offshore oil and gas (O&G) fields using MOPSU (mobile offshore production & storage unit) technology.

This makes Perisai the first company in the O&G industry in the Asia-Pacific region to be awarded the accolade.

Companies win awards all the time. What’s so special about this one?

For starters, it appears that the MOPSU will change the global landscape of O&G sector almost instantaneously.

The MOPSU is a mobile offshore production and storage unit, a self-installing, re-locatable offshore platform with integral crude or condensate storage and offloading facilities with the capability to assemble a wellhead platform at site and support a modular drilling rig.

It has been reported to be the only technology in the world that can supply and install a wellhead platform to accommodate 12 to 20 wells from as low as US$15mil per unit. Overall savings on a typical field development has been estimated at US$70mil-US$100mil.

“It is going to be a game changer and it has strong customer appeal as it allows previously deemed uneconomical fields to be developed cost effectively in an incremental way with minimum capital, minimum risk and optimal facilities,” says Perisai’s managing director Nagendran Nadarajah.

Not surprisingly, Perisai sees the MOPSU technology as the catalyst for its upstream marginal field development business.

A model of Perisai Petroleum’s MOPSU MK I

“Previously nobody touched marginal fields because of its location, size and the uncertainty surrounding recoverable reserves. They plough in so much money, and sometimes, there is no oil to be found. With the MOPSU, fields with recoverable reserves as low as 4 million barrels can now be produced,” says Nagendran.

On this note, Perisai recently signed a joint venture agreement with Gryphon Energy (Asia Pacific) Sdn Bhd for the setting up of a new company (Newco) to market the MOPSU in the Asia-Pacific region and will have options to take up to 90% stake in each unit and first right of refusal on value added services that contracts can generate subject to end users’ concurrence.

Perisai will have a 49% equity stake in the Newco and will provide consideration up to US$6.5mil for the commercialisation of the technology. The remainder of the stake will be held by Gryphon Energy (Asia Pacific) Sdn. Bhd.

For each secured project, the joint-venture company is entitled to a marketing fee of 2% of the total contract value and the mark-up on the project management fee.

Gryphon is involved in the licensing, research and development, marketing and leasing of the MOPSU bareboat. It also undertakes project management for MOPSU design, approvals, procurement, fabrication, installation, hook-up, commissioning, start-up, operations and maintenance.

Now every field can produce

Presently, O&G operators avoid developing marginal fields, as these are often located in remote locations with little or no infrastructure, and with no certainty of the amount of recoverable oil in place.

Traditionally, these fields would require the use of a jack-up rig, a wellhead platform, a mobile offshore production unit (MOPU) and a floating, storage and offloading vessel (FSO), incurring capital expenditure (capex) of at least US$100mil, and if recoverable reserves of oil is found to be inadequate to continue production, the capex will have to be written off.

“With the MOPSU, the field concessionaire has total control over the field as the unit can be used for well appraisal, extended well testing and as an early production system, the crude or condensate storage can be scaled up by utilising an FSO when production exceeds prediction or in the worst case scenario, the unit re-deployed to another field at minimal costs.

“With the MOPSU, there is going to be a paradigm shift. The FPSO replaced huge fixed platforms years ago; the MOPSU will replace FPSOs in water depths up to 120m,” says Gryphon Energy (Asia Pacific) Sdn Bhd executive director Mahendran Suppiah.

Meanwhile, Frost & Sullivan’s director for Asia Pacific Energy & Power Systems Practice, Ravi Krishnaswamy notes that the MOPSU can bring fields online faster.

“It is easily re-locatable, highly scalable and flexible, has built-in production storage capacity and is self-installing. This makes it a very suitable solution for developing marginal fields. It offers a unique value proposition by providing a cheaper alternative to conventional platforms for faster oil or gas field developments,” he says.

With approximately 500 potential marginal fields awaiting development in the Asia Pacific region, the MOPSU does provide a cheaper alternative innovative solution which could prove to be a boon to O&G concessionaires.

Nagendran says that there have been interests from parties in India, Australia, Indonesia, Vietnam and Morocco.

The cost of a MOPSU will average around US$80mil. There will be two variants, the Mark 1 and the Mark 2. The Mark 1 can be deployed in water depths up to 80m, while the Mark 2 is designed for harsher metocean conditions in water depths up to 120m.

The MOPSU will require a fabrication period of 18 months. Hence, if Perisai were to secure a MOPSU contract now, earnings will only flow in 2011 onwards.

Sustainable earnings ahead

Without the MOPSU, Perisai continues to be sustained by its derrick lay barge, the Enterprise 3, which has been contracted out at a day rate of US$95,000 to TL Offshore, a unit of Sapura Crest Petroleum Bhd for 4.5 years up to 2012.

Enterprise 3 started contributing in November 2008, and was also responsible for Perisai’s record earnings in the first quarter of 2009.

For the second quarter to June 30, Perisai recorded a net profit of RM17.1mil, a tenfold increase on a year on year basis from RM1.71mil previously. On a quarterly basis though, it was almost flat compared to the previous quarter’s reported earnings of RM16mil.

These strong earnings came mostly from its Enterprise 3 and its saturation diving system (SAT) that are on long-term charter. Hence, for the first half of 2009, Perisai’s operating margin improved dramatically to 77.5% from 10.3%.

TA Securities analyst Kaladher Govindan is forecasting a net profit of RM57.1mil on the back of revenue of RM92.3mil for Perisai’s year ending December 2009.

Perisai recently raised US$10mil from its redeemable convertible bonds issuance. It has also received approval from the Securities Commission to raise funds through a 10% private placement of its shares. Nagendran says this placement should be completed within the next two months.

“It is a no brainer that the US$10mil that it raised from the recent redeemable convertible bonds and the expected RM40mil that will be raised soon through a 10% private placement are mainly meant for this maiden marginal field venture that will make MOPSU commercially viable if everything goes as planned,” says Kaladher.

Source : TheStarOnline