KUALA LUMPUR (Dec 27): Coastal Contracts Bhd said on Monday (Dec 27) a consortium led by its joint-venture (JV) company Coastoil Dynamic SA de CV (CD) had secured a gas conditioning plant construction project in Mexico worth RM4.5 billion.

The integrated marine oil and gas service and solution provider said in a bourse filing that CD had entered into a service agreement with Pemex Exploracion and Produccion, a subsidiary of Mexican state-owned petroleum company Petroleos Mexicanos (Pemex), to undertake an onshore gas conditioning plant project, namely the EMC Papan Plant with capacity of 300 million standard cubic feet per day (MMSCFD) on the Ixachi Field, Tierra Blanca, Veracruz, Mexico.

According to the filing, the scope of work of the contract comprises engineering, procurement, construction, operation and maintenance of the gas conditioning plant and its related infrastructure.

The firm period for this contract is 3,902 days, including the construction period of 250 days and the operation and maintenance period of 10 years.

The plant is expected to commence operations by the first quarter of the financial year ending June 30, 2023 (FY23).

The contract is expected to contribute positively to earnings and net assets of Coastal Contracts for FY22 and the financial periods thereafter for the duration of the contract.

Coastal Contracts said in a separate statement that it is embarking on the journey of venturing into the onshore gas conditioning plant project in Mexico together with its long-term business partner Nuvoil via CD.

Nuvoil is a well-established Mexican company with a robust track record by virtue of its 23 years of experience in the engineering, procurement, construction, operation and maintenance of onshore gas plants in Mexico, Coastal Contracts added.

It also noted that CD’s first gas conditioning plant, namely the Perdiz Plant with capacity of 180 MMSCFD, commenced operations in July 2021. The Perdiz Plant is now operating at the optimal level of its production capacity, it added.

Thus, Coastal Contracts said upon completion of the EMC Papan Plant, CD would have a combined gas conditioning plant capacity of 480 MMSCFD working on the Ixachi Field. The EMC Papan Plant is capable to provide gas sweetening, dehydration, dew point control and extraction of liquefied petroleum gas services for the Ixachi Field, it added.

According to the filing, the EMC Papan Plant being part of the Ixachi Field is considered to be a strategic project not only for Pemex but also for the Mexico government’s aim to make gas to reach every Mexican in the country over the years to come.

For Pemex, it said that this project is attractive due to its proximity to existing gas collection, separation and measuring infrastructure as well as two major pipelines that will allow gas to flow to central, northern and, eventually, south-eastern Mexico.

Ixachi in comparison to Mexico’s supergiant shallow-water Cantarell Field is expected to be the most productive onshore field in Mexico once it hits peak production, it added.

“We are delighted to have secured the second onshore gas conditioning contract on the Ixachi Field in Mexico. Coastal has set foot in Mexico since the year 2013 when Coastal first signed the bareboat charter agreement for Agosto 12, a jack-up gas compression service unit of Pemex. Agosto 12 currently in its sixth year working for Pemex on the Cantarell Field. Over the years, our mutual trust working relationship with Nuvoil has created synergy for both parties to venture into onshore gas plant projects in Mexico,” said Ng Chin Heng, the executive chairman of Coastal Contracts, in a Monday statement.

According to him, the mega contract win valued at RM4.5 billion is a record-winning contract for the group in its more than 40 years of history.

“We are very optimistic towards pursuing more projects related to Pemex’s production value chain amid a steady recovery of the industry. With oil prices hovering around US$70 (about RM293.47) per barrel and the underinvestment in the industry during the past few years, oil majors are expected to increase capital expenditure spending in year 2022. We believe that Coastal Contracts and our JV company will be able to capitalise on these opportunities,” he said.

The stock was suspended for an hour on Monday morning due to the latest announcement. After it started trading again, shares in Coastal Contracts had risen 11 sen or 9.09% to RM1.32 at the time of writing, valuing the group at RM632.28 million.