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Sing Swee Bee, Gabadi to enter small-scale LNGV market
Dec 02, 2016

The Business Times

SINGAPORE'S largest cryogenic equipment provider has tied up with the first outfitter licensed by leading liquefied natural gas (LNG) tank technology provider, Gaztransport & Technigaz (GTT) to pursue construction and repairs of LNG vessels (LNGVs).

This came within two months from IE Singapore's call on oilfield services companies to position themselves to tap opportunities in the adjacent LNG market.

Private-owned Sing Swee Bee (SSB) and Spain's Gabadi SL signed a 50:50 joint venture (JV) agreement on Tuesday at Offshore Southeast Asia 2016 (OSEA 2016). The joint venture, to be set up with an initial startup capital of S$3 million, aims to secure tank construction tied to demand for small-scale LNGVs in South-east Asia, Australia and New Zealand. The partners will also team up for retrofitting and repairs of LNGVs in these regions.

SSB owns the largest inventory of ISO cryogenic tanks in the Asia-Pacific region. Cryogenic technology is used in LNGVs to hold the fuel chilled to liquid state at no more than negative 163 degrees Celsius.

SSB also stands as one of four companies certified to render integrity test on GTT's membrane cargo containment system. Its new Spanish JV partner, Gabadi, signed a technical assistance and licence agreement in 2014 with GTT, making Gabadi the first outfitter licensed by the LNG containment technology provider.

By joining forces with Gabadi, SSB is looking to scale the LNG value chain. SSB may enjoy the advantage of operating out of Singapore, a top destination for LNGV repairs. But its managing director, Peh Lam Hoh said that competition is increasing in this segment and through this JV, the company is looking to bundle its existing tank testing services with those for ship repairs to complete the solution it has been offering to ship yards.

SSB's general manager Tan Juey Yong told The Business Times the JV partners have also set sights on construction of membrane-type storage tanks for small-scale LNGVs with capacities of 1,000 cubic metres to 40,000 cubic metres. Membrane tanks are used in about 80 per cent of the world's LNGV fleet, according to an estimate from Gabadi.

Gabadi's chief executive, Antonia Jose Llago-Hermida acknowledged that the use of membrane tanks in small LNGVs may be in its infancy, but demand for such vessels is picking up with the first unit of its kind set for delivery in the near-term to the US.

Mr Llago-Hermida cited the International Maritime Organization's (IMO) 2020 global sulphur cap as a key demand driver for small-scale LNG.

In October, IMO reached a decision to enforce the global cap in 2020 instead of pushing out to 2025, removing the uncertainty clouding the prospective use of LNG and other cleaner burning alternatives in the world's bunkering mix.

Gabadi's chief executive sees the advantage of operating out of Singapore, a neutral nation-state, to service Indonesia and other neighbouring small-scale LNG markets. Singapore also boasts a regulatory regime that is accessible and easier to comprehend as well as a financial system closer to European standards, he added.

IE Singapore, citing a projection by Transparency Market Research, said that the world's small-scale LNG market is expected to double to 102.44 million tonnes by 2022 from 50.7 million tonnes per annum in 2015.

Minister of State for National Development, and Trade and Industry, Koh Poh Koon renewed his call at OSEA 2016 opening ceremony for oilfield services companies to develop capabilities and build up their track records to capture opportunities in the growing LNG market.

Dr Koh said that even with the challenges from a deep and prolonged slowdown in the marine and offshore engineering sector, industry players "should continue to build capabilities for the long term and be ready for the next up-cycle".

Industry players have scrambled to replenish their fast depleting order books two years into a drastic slowdown in upstream oil and gas contracting activity brought on by the 2014 oil price collapse. Against this backdrop, IE Singapore in October stepped forward to encourage industry players to look to mid-stream and downstream opportunities that may come with an increasing use of LNG.

Mr Llago-Hermida told BT oil prices stabilising within the current trading band would support small-scale LNGV demand.

Oil prices have rebounded from a 12-year low in the US$20s to trade between US$40s and US$50s in recent weeks following Opec's (Organization of the Petroleum Exporting Countries) declaration of its intent to cut production. Opec is due to meet on Wednesday to hammer out a pact among its member-states for the pledged production cut.