Sembcorp Marine bares strategic shipyard expansion in Brazil

Sembcorp Marine revealed Thursday its wholly-owned subsidiary Jurong Shipyard (JSPL) will be building a new shipyard in Brazil to facilitate operations in one of the fastest growing offshore oil and gas exploration and production markets in the world.

The world's second largest offshore oil rig builder announced the acquisition of a freehold land area of 825,000 sqm (approximately 1.7 times larger than the land size of Jurong Shipyard’s Tanjong Kling location) with 1.6 km of coastline in the State of Espirito Santo in Brazil, to be developed as a shipyard.

Located in the Municipal of Aracruz, the site is about 80 km by road north of Vitoria, the capital of Espirito Santo State and the second largest producer of oil in Brazil.

The site's strategic location near the offshore Espirito Santo Basin, one of the recently discovered giant pre-salt oil basins of Brazil, makes it an ideal location for country’s oil and gas activities.

This investment in the new shipyard is in line with Sembcorp Marine’s global hub strategy, thereby reinforcing the Group’s commitment to construct a strategic foothold in Brazil to expand its offshore oil and gas businesses.

"We have been a key player in Brazil’s oil and gas construction industry since 1997, having delivered to-date a total of 11 units of oil and gas exploration, production and storage platforms for Brazilian oilfields. These platforms produce more than half of Petrobras’ daily 2 million barrels of oil output, thus effectively making JSPL the main contractor to Petrobras," said Mr Wong Weng Sun, President and CEO of Sembcorp Marine.

He added, "In addition to these production units, JSPL’s turnkey 6th generation ultra-deepwater semi-submersible rigs, the West Taurus, Ocean Courage and West Orion, are chartered to Petrobras for deployment in Brazil and the Gulf of Mexico. With our track record and experience operating in Brazil, we are confident that the new shipyard will be well-positioned to meet the needs of the vibrant market for drilling rigs construction, FPSO integration, topsides modules fabrication, ship and rig repairs."

The shipyard is also expected to boost employment and training opportunities for the local workforce in Espirito Santo, according to Mr Wong.

Through Jurong Shipyard, Sembcorp Marine will own 100% of Jurong Netherlands B.V, a company incorporated in the Netherlands. In turn, the company will fully own the locally incorporated Brazilian company,Estaleiro Jurong Aracruz Ltda (EJA), which will own the shipyard.

Jurong do Brasil Prestacao de Services Ltda, another company incorporated in Brazil and owned by Jurong Netherlands B.V, will undertake marine and offshore services in Brazil.

Development and construction works are to be accomplished in stages, but engineering design for the new shipyard has already commenced. The shipyard will be equipped with state-of-the-art facilities upon completion, including a drydock, slipways, berthing quays and ancillary steel and piping facilities.

The new facility will also be capable of drillships construction, building of semi-submersible rigs, undertaking FPSO integration, fabrication of topside modules and PSVs construction, on top of such traditional activities of drilling rig repairs, ship repairs and modification works.

Details of the shipyard and the capex plans will be announced separately.

While Sembcorp Marine expects positive contributions to its earnings from the new shipyard in Brazil in the future, the facility is not expected to have a material impact on Sembcorp Marine’s earnings and net tangible assets per share for the current financial year ending 31 December 2010.