January 2, 2024 [The Edge]- Seatrium has been awarded a contract by Shell Offshore Inc. (Shell) to construct and integrate the hull, topsides and living quarters of the Sparta semi-submersible floating production unit (FPU).
The contract includes the installation of equipment provided by Shell and follows the letter of intent (LOI) signed by both parties on Aug 28, 2023.
The Sparta FPU will be located in the Garden Banks area of the US Gulf of Mexico, which is some 275km off the coast of Louisiana. It will feature a single topside bolstered by a four-column, semi-submersible floating hull and is designed to produce 90,000 barrels of oil equivalent per day (boe/d).
“We are deeply honoured that Shell has awarded Sparta, the third FPU newbuild, to Seatrium, following the successful deliveries of the Vito and Whale FPUs. It is a strong affirmation of our team’s capabilities and the long-standing partnership between both parties,” says William Gu, executive vice president and head of oil & gas international at Seatrium.
“We are fully committed to executing the project well, including the single lift operation and fabrication of the FPU to meet its 20,000-psi [or pounds per square inch] design for use in harsh weather conditions, and delivering the unit to Shell safely and efficiently,” he adds.
The contract value was not disclosed by Seatrium but DBS Group Research, in a research note on Jan 2, estimates it could be worth US$300 million, or $400 million.
“This marks a good start to the year and also a strong affirmation of Seatrium’s capabilities and the long-standing partnership with Shell,” says DBS.
According to DBS, Seatrium’s order wins of some $4.5 billion in 2023 fell short of expectations of $6 billion, no thanks to the longer-than-expected finalisation of some highly anticipated projects.
Nonetheless, DBS expects a “stronger order win momentum” this year, with highlights including the Brazil FPSO project worth $4 billion each, and renewable assets such as HVDC converter stations (estimated at $1.6 to $1.8 billion for the 3rd TenneT project) as well as wind turbine installation vessels (WTIVs).
Late last year, the offshore wind sector was hit by a double whammy of interest rate hikes as well as project supply chain disruptions in 2023, which has led to demand slowdown and cost pressures, especially in the US.
DBS, which is keeping its “buy” call and 18 cents target price on the stock, believes this is “a short-term pain, long-term gain development”.
“While there has been some project cancellations and pushback of project awards, the long-term transition trend towards green energy is undeterred. Operators and government are both re-looking into current tariff mechanism to better reflect the economics of new projects,” adds DBS.
Furthermore, Seatrium’s existing renewable projects are unaffected, though the pace of new projects might slow down in the near term.
Seatrium shares, as at 9.45 am, was up 0.85% to change hands at 12 cents. It is the most active counter thus far on Jan 2.
Pro Trial: Access 12,600 Tank Terminal and Production Facilities
12,600 tank storage and production facilities as per the date of this article. Click on the button and register to get instant access to actionable tank storage industry data
