Govt plan to develop marginal oil fields boosts investment appetite

PETALING JAYA: Prospects for the stronger oil and gas (O&G) players are bright as Petroliam Nasional Bhd (Petronas) is expected to dish out contracts for the exploration of marginal fields.

With the impending award of contracts for marginal fields Sepat and Berantai and another two in April, Petronas also plans to develop about 25% out of the total 106 marginal fields with investments of about US$800mil each.

According to OSK Research, more O&G contracts are expected to be announced as four out of 19 entry-point projects under the Economic Transformation Programme (ETP) would be in the O&G and energy sector that is targeted to receive RM20bil.

“The Government's plan to develop marginal oil fields, tax incentives to promote O&G activities, current levels of crude oil prices as well as the uptrend in the award of new O&G contracts are the indicators of improving investment appetite,” OSK said in a recent report.

Muhibbah Engineering (M) Bhd, in a consortium with Perunding Ranhill Worley Sdn Bhd, had on Wednesday been awarded a RM1.07bil contract by Petronas Gas Bhd for works under its LNG regasification project. Also, SapuraCrest Petroleum Bhd received a letter of award for works valued at US$31.5mil from Petronas' subsidiary PC Myanmar (Hong Kong) Ltd.

Thus, all eyes are now on O&G companies that are likely to be beneficiaries of these developments.

Apart from Kencana Petroleum Bhd emerging as a potential beneficiary of future Petronas-related jobs, OSK Research had also recently favoured Alam Maritim Resources Bhd, Petra Perdana Bhd and Petra Energy Bhd.

“Since sentiments in the sector are positive and based on our prediction of the potential flow of new contract awards, we believe that Petronas and its production-sharing contractors would be looking at the hook-up and commissioning works as well as maintenance, which should benefit players like Petra Energy.

“Of course, when this happens, the full support of vessel operators would be needed to assist in carrying the fabricated structure and matters pertaining to workers, food, water, chemicals and so on, all of which should benefit players like Alam Maritim and Petra Perdana,” it said.

Meanwhile, ECM Libra said the big news for the week was Petronas awarding multi-billion contracts for the development of marginal fields by the end of the month.

“The three fields in question in this announcement would be Sepat, Berantai and Cendor Phase 2.

“Kencana Petroleum and SapuraCrest are said to become production sharing contractors for these fields which they will develop with foreign partners.

“Petrofac is, so far, the key foreign party in the development of these fields as they have managed the first marginal field, Cendor Phase 1, since 2007.

“Although these were positive developments, ECM Libra highlighted that marginal fields were inherently risky because they did not have the economies of scale that major fields like Tapis have. As such, relatively high oil prices would be required for these fields to be profitable.”