One of the world’s premier offshore rig builders Keppel O&M will pivot away from its traditional business to focus on clean energy opportunities in renewables, LNG and even ammonia
Singapore’s Keppel Offshore & Marine (O&M) continues to build its gas value chain portfolio, following the delivery of 7,500-m3 LNG bunkering and supply vessel Avenir Accolade from its Nantong, China, shipyard.
Avenir LNG Limited took delivery of Avenir Accolade, its second 7,500-m3 dual-purpose, LNG supply and bunkering vessel from Keppel O&M.
Following delivery, Avenir Accolade will enter a three-year bareboat charter to LNG Power Limited, a subsidiary of Hygo Energy Transition Ltd, marking its entry into the Latin American LNG market. With the flexibility of transporting and bunkering, Avenir Accolade is designed to support small-scale LNG distribution and vessel refuelling. Delivering LNG to Hygo’s customers along the Brazilian coastline and fitted with specialised ship-to-truck transfer equipment, the LNG bunkering and supply vessel is capable of loading LNG directly into tanker trucks for shoreside distribution in Brazil.
Calling the delivery “another important milestone” for his company, Avenir LNG chief executive Peter Mackey says “2021 is a transformational year for Avenir LNG as we commission our on-shore LNG terminal in Sardinia in the coming weeks and continue to expand our fleet with the addition of four more newbuild vessels by year-end.”
Avenir LNG holds an 80% interest in HIGAS LNG terminal has a small-scale LNG import and export storage facility in Oristano, Sardinia, set to open in Q2 2021.
Supporting LNG bunkering growth
With two other LNG bunkering newbuilds to its credit, Keppel continues to grow its track record in solutions for the gas value chain, reinforcing Keppel’s Vision 2030 to build on opportunities in LNG solutions, while underpinning Singapore’s LNG ambitions.
Like Avenir Advantage, the first vessel delivered to Avenir LNG and first bunkering vessel in southeast Asia, 7,500-m3 Avenir Accolade was built at Keppel Nantong Shipyard.
Additionally, Keppel O&M built FueLNG Bellina, Singapore’s first LNG bunkering vessel, and is currently building dual-fuel container ships, dredgers and LNG bunkering vessels at its shipyards.
Keppel O&M is also promoting LNG as a marine fuel through FueLNG, its joint venture with Shell Eastern Petroleum (Pte) Ltd, which provides truck and vessel LNG bunkering solutions in Singapore.
Transforming for the clean energy transition
With Singapore’s plans to be an LNG bunkering hub, the chilled cryogenic liquid figures to remain part of Keppel O&M’s portfolio for years to come.
Besides LNG, hydrogen, LPG, carbon capture and storage, electric mobility, renewables and ammonia will all figure as key areas for Keppel O&M. Keppel, for example, is part of the coalition studying the feasibility to develop a green ammonia supply chain in Singapore. For its part, Keppel would develop and design an ammonia bunkering vessel and ammonia-ready LPG bunkering vessel and lead in the co-ordination with relevant authorities in Singapore to establish port regulations and operational guidelines.
This all aligns with Keppel Corp’s announcement in January to ‘transform’ its wholly owned subsidiary Keppel O&M with the goal of creating a company that is better placed to support the energy transition – shedding its interests in offshore rig building.
A long-time offshore rig designer and builder, Keppel O&M will exit the business after completing projects currently under construction. Under the group’s new approach, Keppel O&M will not undertake any new project requiring large upfront capex or any without milestone payments. It will exit low value-add repair work and other activity with a low bottom line contribution and focus on higher value-add work.
Keppel Corp chief executive and chairman of Keppel O&M Loh Chin Hua says, “The share of renewables and new energy solutions in the global energy mix has been growing rapidly. To seize opportunities in this fast-changing environment, we are making bold and decisive moves to transform Keppel O&M.”
As part of the transformation, Keppel O&M’s business will be broken into three parts: a Rig Co and a Development Co (Dev Co) – transient entities created to hold S$2.9Bn (US$2.2Bn) worth of completed and uncompleted rig assets – and Operating Co (Op Co), comprising the rest of Keppel O&M, an ‘asset-light and people-light’ developer and integrator of offshore energy and infrastructure assets.
Unencumbered by stranded rig assets, Op Co would have an orderbook of S$3.3Bn (US$2.5Bn), 82% of which is in renewables and gas solutions, focusing on opportunities in the energy transition.
Keppel O&M’s completed rigs will be placed under Rig Co, putting them to work, or up for sale.
As the oil market recovers and utilisation and day rates improve, the rigs will generate steady cash flow, allowing Rig Co to sell them or collaborate with Keppel Capital to seek funding from external investors. Expectations are Rig Co could be monetised or spun off in the future.
Dev Co will focus on completing unfinished rigs, while ‘prudently’ managing cash flow. Rigs with firm contracts with customers will be given priority. Dev Co will be wound up once the rigs have been completed and delivered, or transferred to Rig Co, where they will be put to work or sold.
Op Co, comprising the rest of Keppel O&M, will embrace the roles of developer and integrator, focusing on design, engineering and procurement. Fabrication work will be subcontracted to contractors, including other yards. Keppel O&M’s yard operations will be streamlined, including repurposing or divesting part of its global network of yards.
Exiting the offshore rig building and low-value add repair business, Op Co will instead seek opportunities in floating infrastructure and infrastructure-like projects, including renewables projects such as offshore windfarms and solar farms, gas solutions, production assets and new energy solutions such as hydrogen and tidal energy.
The restructuring is expected to be completed over the next two to three years.
In October, BW LNG reported a ’strike-steel ceremony’ was held at Singapore’s Keppel Shipyard, marking the physical start of the conversion of Marshall Islands-registered LNG carrier BW Tatiana into a floating storage and regasification unit (FSRU).
Built by Japan’s Mitsubishi Heavy Industries and delivered in 2002, the Moss Rosenberg-type vessel has an overall length of 290 m, beam of 46 m, with a capacity of 135,269 m3.
“BW Tatiana is undergoing a conversion that will prepare the vessel for service on El Salvador’s first LNG-to-power project,” said BW LNG in a social media post. “The project will meet 30% of El Salvador’s energy demand and reduce its environmental impact through the use of cleaner fuels for more sustainable power generation.”
A conversion contract was inked in September between Keppel and FSRU Development Pte, a joint venture between BW Gas Limited and Invenergy Investment Co. US-based Invenergy is a major investor in Energia del Pacifico, developer of El Salvador’s LNG-to-power project at Port of Acajutla.
Besides BW Tatiana, other components of the LNG-to-power project are a 378-MW natural gas-fired power plant and an approximately 44-km electric transmission line that will connect to the Central American Electrical Interconnection System, strengthening the country’s electric grid. The project is scheduled to be operational by the end of 2022.
Shell will supply the LNG to the gas-to-power project under a long-term contract.
This is the fifth FSRU conversion secured by Keppel O&M, which previously delivered Hilli Episeyo, its first floating LNG vessel and is currently converting Gimi for its second FLNG conversion.
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