Monday, October 28, 2013

2014 is Another Exciting Year for Oil and Gas Players



Following the discoveries of new oil and gas (O&G) reserves, 2013 has been a year packed with contracts driven nation-wide projects which led to a string of contracts awarded to various O&G players.
 
Encouraging performances in the O&G sector in 2013 has signals that 2014 is going to be another robust year with more contracts that focuses on engineering, procurement, construction and commissioning (EPCC) and engineering, procurement, construction and commissioning (EPCIC) activities expected to be awarded to local and regional O&G players.
 
Analyst Aaron Tan from the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) highlighted that so far 2013 has been a year packed with awards of contracts, new oil and gas discoveries, and possibly more mergers and acquisitions to expand and strengthen income streams.
 
“We can expect a good mix of local, regional and international jobs to be awarded to Malaysian O&G players and we can expect Petroliam Nasional Bhd (Petronas) to keep the momentum going as it pushes for more deepwater, high pressure, high temperature, and high carbon dioxide oil fields,” he said in the research firm’s monthly review and outlook of the O&G industry report.
 
To date, according to the research arm of M&A Securities Sdn Bhd (M&A Securities) approximately RM19 billion worth of contracts have been awarded to local oil and gas players in the first half of 2013 (1H13).
 
“Half of the contracts were awarded by Petronas including PAN Malaysia Hook-Up and Commissioning (HUC) contracts which have been loaded out in May 2013,” it added.
 
In 2H13, the research firm said Petronas and its production-sharing contractors (PSC) are expected to call out some jobs which should provide huge opportunities for the local oil and gas companies.
 
These jobs include inspection, repair and maintenance (IRM) jobs of which PSC contractors such as Shell, Murphy, Carigali Hess and ExxonMobil are expected to call for IRM contracts worth between RM1 billion to RM2 billion soon.
 
In addition, Hess Corporation has called out two tenders in June for four platforms related works of seven fields in the North Malay Basin project which comprise Kamelia, Bergading, Zetung, Anggerik, Kezumba, Melati and Gajah. Kamelia field is already being developed using floating production storage and offloading (FPSO) vessel and a wellhead platform.
 
The Pan Malaysia Transportation and Installation (T&I) contracts worth between RM3 and RM5 billion has also been tendered out.
 
“Previously, the Pan Malaysia HUC jobs has been dished out in May 2013 where Dayang Enterprise Holdings Bhd (Dayang Enterprise) won RM3.8 billion worth of HUC jobs from Murphy Oil, Shell Malaysia and Petronas Carigali while Petra Energy secured RM2.5 billion package from Petronas Carigali.
 
“Finally, SapuraKencana managed to grab approximately RM500 million of HUC contract, the research firm explained.
 
Meanwhile, analyst Arhnue Tan from Alliance Research Sdn Bhd (Alliance Research) said that a slew fabrication projects have just been announced in Malaysia and Thailand.
 
“First is the Nosong CPP which has recently opened for a front end engineering and design (FEED) contest with three main contenders including Technip-MMHE, McDermott-TH Heavy, and RNZ-SapuraKencana.
 
“The FEED studies will lead to an EPCIC contract for a wellhead platform (WHP) and two pipelines. The contract is slated for award by end 2013,” Arhnue said.
In addition, Baronia CPP (an enhanced oil recovery project) and jacket (part of Baram Delta) is estimated to be 22,000 metric tonne and will be equipped with gas processing and compression facilities.
 
“The formal tender document is expected to be issued by March 2014 at the latest, leading to the potential award of the EPCIC contract in early 2015 and is likely to be an international tender,” the analyst explained.
 
Meanwhile, in Thailand, PTTEP is offering an EPCIC contract for up to 11 wellhead platforms for the Arthit field and is said to be calling an international tender slated for 2014.
 
“We view that the Nosong project will be in the range of RM200 to RM300 million as it is only for a WHP but the Baronia CPP could pan out to be another multi-billion ringgit project.
 
“Based on the news report of 22,000 metric tonne project size, we estimate the contract value at RM1 to RM1.5 billion.
 
“In Thailand, the multiple WHP contract could be sizeable as well at RM500 million to RM1 billion,” Arhnue said.
 
While these projects will open up opportunities to local O&G players, the analyst cautioned that competition could be stiff as regional heavyweights such Thai Nippon Steel, Korean shipyards Samsung and Hyundai, as well as Singapore based SMOE to be in the fray for jobs.

Aside from that, Aaron outlined that other positive industry developments include the sustained momentum in oil prices driven by sustained global demand, and cleverly orchestrated production output which would continue to spur exploration and production (E&P) activities.
 
“Petronas, along with its foreign partners are successfully hitting new oil pays locally which will trickle an abundance of services opportunity down the value chain,” he said.
 
Alliance Research expects robust contract flow would continue with new developments like marginal fields, EOR projects and new gas developments. It also expects new fabrication projects to come on-stream in late 2013 or 2014.
 
In addition, Arhnue noted that the outlook for the O&G sector in Sabah and Sarawak continues to remain robust. The analyst explained that this is similar to that of Peninsular Malaysia, with many new developments coming up as well as EOR projects.
 
MIDF Research maintained its positive stance on the sector and opined, “We can expect a good mix of local, regional and international jobs to be awarded to Malaysian O&G players and we can expect Petronas to keep the momentum going as it pushes for more deepwater, high pressure, high temperature, and high carbon dioxide oil fields.”


Source: The Borneo Post

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