Houston-based McDermott International and Malaysian fabrication firm TH Heavy Engineering (THHE) will end their Malaysian joint ventures Berlian McDermott (BMD) and THHE Fabricators (THF), the pair announced on Friday (23 September), citing local market conditions.
The proposal will see both THHE and McDermott trade interests in the joint ventures to the other. For example, THHE will transfer its 30% interest in BMD to McDermott, while McDermott will transfer its 30% stake in THF to THHE. Each transfer was valued at US$17.33 million (MYR 71.73 million)
THHE said that back in 2013 the intent of the joint ventures was to enhance THHE’s service offerings from the existing fabrication construction services to create a fully integrated (engineering, procurement, construction & installation) EPCI services company. "THHE, in collaboration with McDermott, would be able to offer a one stop end-to-end EPCI service solution, enter into a higher value added business sector, cross selling of additional services to existing customer base and embark on higher margin integrated EPCI jobs with Petronas and other oil majors and thus elevate THHE into a Tier 1 player on the oil and gas sector in Malaysia," the company said.
However, THHE said, the lowered oil prices and supply overhang, led both companies to pursue different business paths, with THHE choosing to diversify its business to include the downstream sector as well as non-oil and gas related work.
A McDermott spokesperson told OE: “McDermott and TH Heavy Engineering Berhad (THHE) mutually and amicably agreed to end our joint venture relationship. Due to current market dynamics, the EPCI market in Malaysia has softened during the three years since the joint venture began in 2013. As a result, McDermott and THHE jointly decided to bring the joint venture to an end, as each company is in a better position to manage the current cycle with more flexibility on its own.
"McDermott remains committed to operating in Malaysia as we have done for more than 30 years. As reported earlier this year, McDermott moved its Asia headquarters to the Malaysian capital of Kuala Lumpur, where we continue to focus on offshore construction and deep-water opportunities in Malaysia and throughout the region.”
Image: The Pulau Indah Fabrication Yard in Malaysia. Photo from McDermott.
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