ABB’s Equipment & Services for Prelude Floating Facility

Zacks

ABB Ltd. ABB was awarded a five-year contract to provide equipment and services for Shell’s Prelude FLNG (floating liquefied natural gas), which is the world’s first FLNG facility.

The contract calls for delivery of generators, motors, variable speed drives and low-voltage switchgear. In addition to assuring service and lifecycle management of the electrical equipment, it also includes service and support for motors from third-party vendors.

The company will build up a spare parts inventory, workshop repairs and training, and will also offer round-the-clock technical support over the phone as well as on-site. ABB’s equipment will ensure minimal downtime and optimize the facility’s efficiency.

The spare parts and replacement systems for the project will be procured this year, and training will begin soon after. Prelude is the largest floating facility ever built, with a deck longer than four football fields laid end to end. After being towed to its location off the northwest coast of Australia, the facility will be fastened to the underwater infrastructure in the Browse basin. It is scheduled to be anchored there for 25 years.

In order to unlock the facility’s productivity, it is crucial to have a reliable service network. The Prelude facility will be fitted with ABB’s integrated marine solutions for improved flexibility, reliability and energy efficiency.

The facility will produce about 5.3 million tons of liquids per annum, with the electrical system powering 14 gas plant modules. The environmental impact of FLNG is negligible when compared with conventional production platforms and pipelines. It also enables oil and gas companies to develop fields that would not be economically feasible otherwise.

ABB has been streamlining its business in order to improve its services and boost organic growth while minimizing risks and enhancing competitiveness.

However, in the near term, ABB’s exposure to oil and gas markets makes it susceptible to current price volatility in the market and may weigh upon the company’s financials in the coming quarters. Also, ABB remains quite vulnerable to currency translation risks, and even hedging activities will not be able to protect it against significant fluctuations. In fourth-quarter 2015, ABB witnessed 10.7% negative effect on revenues on account of foreign exchange translations, which are anticipated to hurt the company in the quarters ahead as well.

ABB currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the same space include ESCO Technologies Inc. ESE, II-VI Inc. IIVI and AZZ incorporated AZZ. While ESCO sports a Zacks Rank #1 (Strong Buy), II-VI and AZZ hold a Zacks Rank #2 (Buy).

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