1. 64 } MALAYSIAN BUSINESS z JULY 16, 2011
they consider potential contractors and
various technological solutions in order
to determine the optimal development
of the field.
PRICING AT TENDER STAGE AND RISK
ALLOCATION
The price (normally a day rate) which the
contractor is offering is implicitly based
on a certain contractual risk allocation.
Price is coherent with the proposed risk
allocation, costs of finance which are
based on revenues (commencement
of day rate). Bids make the necessary
qualifications so that the pricing is
coherent with the final risk allocation in
the contract.
Negotiations for FPSO contracts are
complex and require careful navigation.
Two possible contract strategies are the
turnkey strategy, where the Operator
employs a single contractor (as Head
Contractor) to manage and integrate
projects with sub-contractors, or the
modular strategy, where the Operator
contracts separately for component parts
of the project like design, procurement,
construction and installation. The
Operator manages marine and offshore
operations of the FPSO itself.
At this stage, the field operator will
have two main focuses:
(i) to ensure fast-track schedule/
commencement of the project; and
(ii) the coordination and interface
between the completion of the drilling
phase, subsea hardware delivery and
installation, and the hook-up of the
FPSO.
The field operator will not wish to
commit itself to the purchase or charter
an FPSO with defined delivery dates
without ensuring that other necessary
deliverables for field development
are available at the relevant time. It
is, therefore, unrealistic to rely on a
fully negotiated FPSO contract before
commencement of the work in order
to secure a schedule, and the parties
typically negotiate a Letter of Intent (LOI)
or heads of agreement as a confirmation
of the tender award. This phase involves
substantial challenges for both parties.
Some contractors prefer that front-end
engineering and design (FEED) studies
to be ordered before and after a pre-
qualification or independently. The FEED
contractor is more of a subcontractor to
the field operator. However, if this delivery
results in the later award of the lease
contract, the issues under discussion
could become a source of contention.
The FEED contract should, therefore, be
reviewed with this in mind. In any event,
regulation in respect of design protection
and general IP protection must also be
addressed.
Once the LOI is awarded, showing
the commitment from the operator, the
contractor needs to start placing orders
with subcontractors in order to meet the
time schedule. The LOI should also cover
cancellation fees and the contractor
should avoid any kind of reservoir risk.
Projects where several partners are
developing the field, but only the minor
partner will be the formal contract party,
cancellation fess can end up worthless if
backed by a single purpose company.
In negotiating the contract, some key
contract issues need to be considered,
namely, risk management (see table).
FPSO ...from page 61
mb
– overtook both fast food centres and
mobile line services as the top spender
of radio advertising in the Jan-April 2011
period, pumping in almost RM12.4 million
(see Table 1).
CRM, which has 19 member stations,
runs various educational events for the
public as part of its continuous efforts to
create more awareness about the radio
broadcasting industry. Among them are:
Planet Radio, an educational forum for
students; Boot Camp, a workshop to
engage advertising agencies on innovative
radio advertising campaign ideas; Radio
Fest, an event for fans which includes
a concert, games and activities; and
Radio Day, an annual CRM event to
commemorate the Malaysian radio
industry’s milestones.
CRM commissions Nielsen to conduct
two surveys a year to provide the industry
with an enhanced measure of radio
listening. Nielsen RAM Malaysia studies the
demographic profile, listening preferences
and product consumption of people in
Peninsular Malaysia. The study is based on
individual quarter-hour diaries completed
by a representative sample of 3,000
individuals in Peninsular Malaysia.
The most recent survey – Wave 1, 2011
– was conducted from March 7 to April 3,
2011 (see Table 2).
Both CRM and Nielsen aspire to have
a continuous monitoring service in place
to enable actual post-buy analysis for
advertising campaigns, and to conduct
more ‘waves’ a year.
CRM is also proud to claim to be the only
medium in Malaysia to have its surveys
audited independently. Dr Rob Hall, who
has been the Audience Survey Auditor
on behalf of Commercial Radio Australia
since 1993 to monitor the quality of radio
ratings surveys, has been regularly called
to audit radio surveys for CRM ‘on an ad
hoc basis’, says Borhanuddin.
The dispute between Sun Media
Corporation Sdn Bhd and Nielsen on
The Sun’s readership figures, for example,
would have been resolved, opines
Borhanuddin, if the parties would agree
to an independent audit. mb