Published April 15, 2009

Petroprod case unlikely to hit Jurong Shipyard

SembMarine: Material impact on 2 deals unlikely 'based on best known information'

By VINCENT WEE

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SEMBCORP Marine unit Jurong Shipyard, which has over US$500 million in orders for a jack-up rig and a production floater conversion from Norwegian customer Petroprod, yesterday said it does not expect to be adversely affected as news emerged that the Cayman Islands-registered company had gone into liquidation.

Over US$500m in orders from Petroprod: The two contracts for Jurong Shipyard are for a jack-up rig and a production floater conversion

Industry website Offshore 247 reported that provisional liquidators from KPMG have been appointed to oversee the affairs of the Larsen Oil and Gas-managed company after a petition by loan trustees, Norsk Tillitsmann, who had last week issued a notice to Petroprod's management declaring that the bond loans which it is trustee for were in default and were immediately due for payment.

SembMarine said in an announcement yesterday: 'Petroprod Ltd is the parent company of Petroprod D&P I Ltd which has contracted with Jurong Shipyard to build an MSC CJ70 jack-up drilling rig, and Petroprod 1 Ltd which has contracted with Jurong Shipyard to convert an existing tanker into a floating production storage and offloading vessel (FPSO).'

It added: 'Jurong Shipyard is liaising with the provisional liquidators to obtain more information. Based on best known information, this event is unlikely to have any material impact on the two contracts.'

Problems at PetroProd, which has the US$442 million CJ70 harsh environment jack-up rig being built at Jurong, started emerging from November when it said it was negotiating to reschedule payments for the rig. Completion has also been delayed from the third quarter of this year to June 2010.

The company, which had gone aggressively into the FPSO market, also revealed that the tighter market for FPSOs would mean more mergers and that management was discussing such moves.

Petroprod abandoned its FPSO plans when, after selling off two of the three tankers it bought to convert into FPSOs, it was reported by Offshore247 in January to have also sold the MT Arc, which is currently being converted in Jurong, in a US$216 million deal. Petroprod said at the time that the buyer would make milestone payments and be responsible for the completion, slated for late this year, of the FPSO conversion.

The Oslo-listed company reported a US$288 million loss for the fourth quarter, including impairment charges of US$286.2 million caused by writedowns on the value of the jack-up and the FPSO.

Another aggressively expanding Norwegian company, Seadrill, in January agreed to reschedule payments for a huge four-rig order from both Keppel and SembMarine.

SembMarine shares closed three cents lower at $2.23 yesterday.