KUCHING: KKB Engineering Bhd (KKB) has increased its 2019 capital expenditure (capex) to RM30mil, from an earlier approved sum of between RM20mil and RM25mil, in order to invest more in automation and information and communication technology (ICT) at its steel fabrication yard at Jalan Bako here.
Group executive director Kho Pok Tong (pic) said the additional capex would be utilised to acquire state-of-the-art automated machinery and equipment as well as on ICT, like specialised engineering software.
Also to be installed is an overhead heavy lifting equipment for a proposed mega workshop currently under construction at the fabrication yard.
He said the bulk of the capex was to finance the mega workshop project to boost capacity in preparation for more offshore structure fabrication jobs in the oil & gas industry by its subsidiary OceanMight Sdn Bhd.
Upon scheduled completion of the covered mega workshop by early next year, the fabrication yard will accommodate multiple projects up to 18,000 tonnes per annum of works to be carried out simultaneously .
“The current utilisation rate of the fabrication yard is between 30% and 40%. This is expected to double in two years. Besides steel fabrication works for offshore structures, we will also manufacture steel pipes for the oil & gas industry,” Kho told StarBiz.The fabrication yard currently has five covered workshops and load-out jetties fronting the Sarawak River.
Since obtaining its fabrication licence from Petroliam Nasional Bhd (Petronas) in 2013, OceanMIght has completed five contracts worth some RM300mil for oil majors. The company is expected to complete two more ongoing contracts valued at RM170mil by year-end.
OceanMight was recently awarded Petronas Frame Agreement that qualifies the company as one of five contractors to bid for contract works involving the provision of engineering, procurement and construction (EPC) of fixed onshore structure by the national oil company.
Under Petronas Activity Outlook 2019-2021, industry sources expect Petronas to roll out offshore fabrication contracts worth about RM4.5bil during the three-year period. Between three and seven contracts are expected annually.
According to Kho, OceanbMight is eyeing more fabrication jobs in light to medium-weight wellhead platforms.
In the current quarter (April to June), he said KKB group is expected to bid up to RM350mil worth of contracts.
He said projects in Sarawak and Sabah that the group had bid for and would tender by next month include manufacturing and engineering as well as fabrication of offshore structures.
In the first quarter of 2019, the group tendered for RM284mil worth of projects.
KKB recently secured two construction contracts under the Sarawak Water Grid programme worth RM110mil and the supply of concrete-lined steel water pipes worth about RM17mil in Sabah.
Besides the water grid programme (phase 1), the Sarawak government has rolled out two other mega infrastructure projects - Sarawak Coastal Road and Second Trunk Road - with total approved allocation of about RM11bil.
Kho said the awarding of more contracts under the RM2.8bil water grid programme would drive up the demand for steel water pipes.
He expects the group’s sales of steel water pipes to at least double to RM68mil this year, from RM34mil in 2018.
KKB group, which is sitting on a cash pile of RM110mil, is Sarawak’s sole manufacturer of steel water pipes. The group also owns similar manufacturing facilities in Sabah.
“KKB will be looking at a few of the 11 work packages of the Second Trunk Road project when tenders open,” said Kho.
The project is currently under design, with tender for the first package expected to be out in fourth quarter of 2019.
The 235km Second Trunk Road, on completion, will shorten the driving time from Kuching to Sibu by half from the usual five hours.
Kho said KKB group has a current order book of some RM900mil that could keep it busy until 2Q-2021.