KUALA LUMPUR (May 18): EA Technique (M) Bhd foresees no challenges in its floating, storage and offloading (FSO) segment, as most of its contracts serve the downstream segment and are on long-term charters, as opposed spot charters.

EA Technique managing director Datuk Abdul Hak Md Amin said today that the company's FSO contracts have so far not faced any early termination and are for transporting clean petroleum products (CPP) like jetfuel and RON95 fuel, which is more stable than the upstream segment of the oil and gas (O&G) segment.

In case an early termination arises, the FSOs can be converted to serve the trading segment, he added.

"So far, we have not come to [any] renewal yet," he told reporters after the company's annual general meeting (AGM).

"Because our vessels are trading vessels, if FSO is not renewed, then we use it for trading. On our side, we are quite safe. If they don't renew (the contracts), then we just convert the tankers back to trading vessel," he added.

Abdul Hak was responding to queries on whether its FSO contracts would face challenges of early termination, suspension and the likes that MISC Bhd was experiencing.
 
In the first quarter of financial year 2016 (1QFY16), MISC's liquified natural gas (LNG) profits were reportedly affected by the expiry of two first-generation contracts in 2015, as well as Petronas’ early termination of two of MISC's LNG contracts in 4QFY15 (Tenaga Dua and Tenaga Tiga) and another two in 1QFY16 (Aman Hakata and Aman Bintulu), after marginal oilfields have dried up, as well as Yemen LNG’s one-year suspension of two ongoing contracts from early-2016 due to armed conflict.

Petronas' partial compensation to MISC and Yemen LNG is also expected to compensate MISC in 2017.

EA Technique's orderbook stands at RM1.7 billion as at Jan 1, 2016;  60% of its revenue is US dollar-denominated, while 30% of its costs are ringgit-denominated.

Of its total sales, 63% comprises O&G engineering projects, while the remaining 37% is transportation-related contracts.

The bulk or 91% of EA Technique's fleet of 35 vessels are on long-term charters. Only four vessels have contracts expiring 2017 to 2018, while the rest have tenures stretching to December 2025.

Its FSO vessels operate in the Malaysian marginal oil fields.