(EnergyAsia, March 11, Tuesday) — Hoe Leong Corporation Ltd, a Singapore-based supplier of heavy equipment parts for the agriculture, building and infrastructure construction, forestry, marine and mining industries, said it and its subsidiaries will invest US$8.5 million in a proposed joint venture, Supreme Energy Pte Ltd (SEPL).

SEPL will charter out Supreme Energy 01, a steel flat top deck cargo barge currently undergoing conversion into a floating mud plant barge, to Supreme Oilfield Services Pte Ltd (SOS). The barge will be used to support offshore drilling operations.

SEPL will charter out the barge to SOS on a bareboat basis for  two years, with an option to extend the period for another year, at US$8,000 per day or at an annual charter revenue of no less than US$2.8 million.

SOS, in turn, has signed a back-to-back charter with PTSC, a subsidiary of PetroVietnam and an appointed sub-contractor to Talisman Malaysia Limited, a subsidiary of Canada-based Talisman Energy Inc. 

Hoe Leong chairman and CEO James Kuah said: “We believe that the demand for energy will remain strong in the coming years and with energy prices remaining at current levels, this sector is expected to remain attractive in the medium to long term.

“Based on our preliminary assessments, the financial return from this investment will be substantially higher than our current business as we continue to grow our equipment parts business and expand into new markets.”

The company said it is confident that the Supreme Energy 01’s unique design would call for an extension on the charter period if the need for such services remains. Typically, such charter contracts are entered into for two or more years.

Singapore Exchange-listed Hoe Leong is looking to boost shareholder value with this diversification into the oil and gas sector through SEPL, which will own, charter and manage all types of offshore equipment, barges, ships of all kinds and other related activities.

Hoe Leong and SOS own 60% and 40% of the US$1 million share capital of SEPL respectively. Both parties will also proportionately extend another US$2.5 million to SEPL in the form of a non-interest bearing shareholders’ loan.