PETALING JAYA: Coastal Contracts Bhd will focus on building oil and gas (O&G) logistics vessels to capitalise on the current high crude oil prices and increase in O&G exploration as well as production activities. 

Executive chairman Ng Chin Heng told StarBiz that the company was currently working to secure the supply of machinery and equipment for the building of anchor handling tugs (AHT), utility supply vessels (USV) and offshore support vessels (OSV). 

“We are also in talks with a view to venture into fabrication of offshore-related structures. With that in mind, we are looking to expand our shipyard capacity to undertake shipbuilding, ship repairing and offshore structure fabrication simultaneously,” Ng said. 

With its acquisition of a 52-acre site in Sandakan, Sabah, Coastal could be looking to do just that, and this has made a couple of local research outfits bullish about its prospects.  The land cost the company RM2mil, which would be internally funded. Three times larger than the company's existing shipyard in Sandakan, the land could be developed into a shipbuilding and repair facility. Coastal gained ownership of the land after it bought 100% stake in the previous owner, Pleasant Engineering Sdn Bhd. 

Hong Leong Group Research (HLG) is “excited” about Coastal's new acquisition, because the land would allow more vessels to be built simultaneously and enable the company to make larger vessels due to the strategic position. HLG said in a report that as the domestic oil exploration industry expanded, there should be more demand for larger and higher-powered vessels, which would mean bright prospects for Coastal, going forward. 

K&N Kenanga agrees that demand for Coastal's vessels would rise owing to increasing O&G activities in Sabah, where Coastal is believed to be the only shipbuilder catering to the O&G industry.  With over 50 new oil platforms reportedly to be built annually over the next three to five years, most of the platforms would be built in and around Sabah since it had up to half of Malaysia's reserves, it said. 

“With a minimum of three AHTs or USVs to service each platform and assuming there is no excess capacity, a total of 150 AHTs or USVs will be required for the 50 new platforms,” it added. 

In general, the brokerage thinks the remainder of the year ending Dec 31, 2006, could be good for Coastal, given the demand for its AHTs and USVs. Coastal's management also revealed that 10 vessels were delivered during the quarter ended June 30. 

Coastal also said it aimed to derive revenues of up to 50% and 80% from the O&G industry for the fiscal years ending Dec 31, 2007 and 2008 respectively.  

Coastal now has an order book worth RM200mil and RM300mil for 2007 and 2008 respectively.  K&N said the company had signed two memoranda of understanding with Yayasan Sabah that could turn out to be a catalyst for securing contracts for shipbuilding, offshore-related steel structure fabrication and vessel chartering.