Chinese jack-up fabrication specialist China Merchant Heavy Industry (CMHI) and French offshore engineering giant TechnipFMC have started talks on forming a joint venture to focus on engineering, procurement and construction work for offshore modules.
The two companies met in Houston last week during the Offshore Technology Conference for discussions that could eventually lead to the formation of a joint venture in which CMHI would hold a majority stake.
The joint venture would then convert part of the facilities at CMHI Jiangsu’s yard at Haimen, in eastern China’s Jiangsu province into what it is claimed would be the world’s largest module fabrication base.
Well-placed industry officials said TechnipFMC is keen to strike the co-operation deal with CMHI, as it looks to capitalise on its expertise in module engineering while taking advantage of China’s relatively cheap labour costs so as to have an edge in future module fabrication tenders.
They added that as part of the potential deal CMHI would contribute part of its Haimen facilities as its assets in the joint venture.
Hong Kong-registered CMHI currently has two facilities geared to offshore projects.
In addition to Haimen, it owns and operates the Yiulian dockyard in Shenzhen. Both are built to focus on rig building.
Built in 2013 with a registered capital of US$200 million, CMHI Jiangsu covers 1.4 square kilometres with 2500 metres of coastal frontage and boasts China’s largest drydock.
The yard now has a number of jack-up rigs being completed, pending delivery once the rig owners sign drilling contracts.
In late March, the yard signed a contract with Hong Kong-registered Talent Offshore to build two jack-up platforms with options for two more similar units. The yard has three more similar units in its backlog for completion.
Although it has extensive experience of building jack-ups, CMHI has until now yet to get involved in fabrication of modular production units.
However, many Chinese fabrication yards have looked to diversify into module fabrication as they try to cope with the business headwinds created by the challenging offshore market after the oil price crash.
Industry officials said partnering with TechnipFMC could offer CMHI a short cut to get involved in the module fabrication sector, providing it with an advantage over other Chinese yards in tendering for the future projects, particularly the second phase of Yamal liquefied natural gas project in Russia’s far east.
Chinese yards are keen to pursue opportunities to build part modules for Yamal’s second phase, or fourth train expansion project.
A TechnipFMC-led consortium as lead contractor for Russian operator Novatek and its project partners sub-contracted work to up to six Chinese yards to build modules for Yamal’s first phase.
The joint venture negotiations between CMHI and TechnipFMC are taking place as CMHI and offshore fabricator CIMC Raffles negotiate merging their operations. Just last month, CMHI acquired a 24.53% stake in CIMC.