Monday, 31 January 2011

Petronas disaran bimbing PKS

PETRONAS disaran melipatgandakan usaha untuk membimbing lebih ramai usahawan tempatan seiring dengan hasrat kerajaan menyokong dan memajukan sektor perusahaan kecil dan sederhana (PKS) negara.

Timbalan Menteri Perdagangan Antarabangsa dan Industri, Datuk Mukhriz Mahathir berkata, ketika ini, Petronas sememangnya membantu usahawan PKS membabitkan teknologi dengan menganugerahkan kontrak selain membuka peluang untuk golongan terbabit mengembangkan perniagaan ke luar negara.

“Syarikat PKS Bumiputera dalam bidang teknologi tinggi kini mempunyai kebolehan dan mampu bersaing dalam pasaran terbabit. Bagaimanapun, syarikat terbabit memerlukan modal dan capaian kepada pasaran.

“Saya berharap Petronas membantu kerajaan untuk membangunkan golongan PKS ini. Malah, saya sentiasa membuka pintu untuk mengadakan perbincangan dengan Petronas,” katanya pada majlis pelancaran HUGIN 1000, kenderaan dalam air berautonomi (AUV) di Kuala Lumpur, semalam.

Mengulas pembelian AUV oleh Offshore Works Asia Pacific, Mukhriz berkata, cabaran dihadapi kini ialah untuk memastikan perkhidmatan AUV diperkenal dan digunakan secara agresif, bukan saja di negara ini, malah kawasan serantau.

Saturday, 29 January 2011

Petronas to announce 4 marginal oil fields by April

Petronas) expects to announce four marginal oilfield development projects by April, of which two will be revealed “soon”, according to its president Datuk Shamsul Azhar Abbas.

Shamsul said on Thursday, Jan 27 the consortiums or partnerships that are involved in the marginal field development had to have at least 30% local equity interest.

He said the development marginal oilfields would not be on production sharing contracts (PSC), which the national oil company has with several oil majors, such as ExxonMobil and Shell, since 1970s.

“It is a risk service contract (for marginal field development). Unlike the PSC, the oil & gas reserve is 100% Petronas-owned,” he said at a media briefing.

Shamsul said the consortiums that were awarded the development projects would be like “service providers” for Petronas. They would be paid fees for the services and infrastructures plus “performance bonus”.

He confirmed that the bidding process for the two much talked about marginal fields, namely Sepat and Berantai, had concluded.

“We are still negotiating on certain details…would be announced soon,” said Shamsul when commenting on the two clusters of marginal oilfields in Sepat and Berantai.

In addition, he disclosed that another marginal oilfields have been opened up for bid currently which are expected to announce in April.

SapuraCrest gets US$31.5m Petronas job in Andaman Sea

SapuraCreast Petroleum secured a US$31.5 million contract from Petroliam Nasional Bhd’s subsidiary to install offshore facilities in the Andaman Sea.

SapuraCrest said on Wednesday, Jan 26 its unit TL Offshore Sdn Bhd had received a letter of award from Petronas subsidiary PC Myanmar (Hong Kong) Ltd for the transportation and installation of offshore facilities for the Yetagun Phase 4 development.

“The offshore works are expected to commence between October to November 2011 and run for a duration of 40 days,” it said, adding the value of the works was about US$31.5 million.

Friday, 28 January 2011

‘Sabah can review oil deal with Petronas’

If the Federal Constitution can be amended so can an Act in Parliament, says United Borneo Front.

The Sabah government has the power to review its oil royalty contract with Petronas, according to United Borneo Front (UBF) chief Jeffrey Kitingan.
He said that the state government could also decide how much money it should get from the federal government-owned Petronas for the oil and gas derived from the state.

“The state government has immense power to review its contract with Petronas. The Petroleum Development Act (PDA) 1974 which effectively vests all petroleum throughout this country in one company forever, is itself amendable.

“Whether the PDA 1974 is unconstitutional… and an unconscionable Act of Parliament is something that the people of Borneo should keep in mind.”

He was speaking to a group of people at UBF’s “Borneo Tea Party” hosted by UBF supporter, Andrew Joseph Tuining, in Ganang, Kepayan, near here over the weekend.

The state signed away its oil rights to Petronas in 1976, two years after the PDA and days after the tragic deaths of chief minister Fuad Stephens and many members of his Cabinet in a plane crash in Kota Kinabalu. Today, Sabah has become the poorest in the country despite its massive mineral riches.

Under the PDA 1974, Petronas is granted exclusive rights in perpetuity to explore, exploit, win and obtain petroleum onshore and offshore in Malaysia and its rights, liberties, powers and privileges are irrevocable, said Jeffrey.

In return for this, he explained, the Act states that Petronas shall make cash payments to the federal government and relevant state governments where oil is derived, as may be agreed between the relevant parties.

According to Jeffrey, people are afraid to bring up this issue because the business is substantial, running into billions of dollars every year, and is effectively shared between Petronas and its foreign partners like Royal Dutch Shell Plc.

Review Sabah’s share

Jeffrey said that the shareholders of Royal Dutch Shell, incorporated in the UK in 2002, include some of the most powerful personalities, companies and countries in the world such as Britain, Singapore, Kuwait, Saudi Arabia and Norway.

“In December 2009, Petronas and Royal Dutch Shell signed a deal to develop Iraq’s oilfield of Majnoon, with 60% going to Royal Dutch Shell and 40% to Petronas.

“Whatever is derived from Sabah’s oilfields are peanuts compared to what Petronas is getting overseas with its foreign partners. So, why can’t they (Petronas) be reasonable and review that measly 5% that was agreed upon in 1976?” he asked.

He said that an Act of Parliament can be amended just as the Federal Constitution can be amended and as such, Sabah should go back to the negotiation tables, in accordance with Section 4 of the PDA 1974, to review how much cash payments Sabah should receive from Petronas.

“If the World Bank states that Sabah is the poorest state in Malaysia, then judging from the international activities of government-owned Petronas, Sabah has clearly been short-changed and taken for a ride by both the federal people in Malaya and the powerful people behind those foreign-owned giant oil companies overseas.

“Shell’s interest in Borneo’s oil reserves is not new. It has been given the right to explore oil in this area since the early 1900s. So it is hardly surprising that it would continue to have vested interests in our petroleum with Petronas.

“Nobody is going to fight this issue with internationally powerful people in this business, knowing it would be an exercise in futility.

“We merely want Petronas to review our share because it is clearly making more than its fair share outside Sabah. Petronas should not be selfish to Sabahans on what should rightfully be ours,” Jeffrey said.

Borneo Agenda

UBF co-founders Nilakrisna James and Zainal Ajamain also spoke at the Tea Party talks on the political history of Malaysia, the cabotage policy, state resources and the laws which legitimise unfair economic policies.

Ever since its inception on Dec 16, 2010, the UBF founders have been criss-crossing the state giving talks on the Borneo Agenda which calls for empowerment and more freedom to Sabah and Sarawak.

This weekend, Jeffrey will visit remote Entilibon in Telupid, in the centre of Sabah, to deliver similar talks.

The core demands of the agenda are:
  • Establish a compliance mechanism for the Malaysia Agreement 1963, especially Article VIII (8);
  • Fairer revenue sharing formula and representation at the federal level;
  • Restore Sabah and Sarawak’s status as equal partners in the federation;
  • Protect native rights as enshrined in Article 153 of the Malaysian Constitution;
  • Abolish the cabotage policy;
  • close the economic and digital gap; and
  • Resolve the problem of illegal immigrants and fake MyKads in Sabah.

Thursday, 27 January 2011

OSK cuts profit forecast for Petronas Gas

OSK Research has warned that Petronas Gas Bhd's profits for the second half of its financial year ending March 31, 2011 (FY11) were unlikely to match its stellar first-half performance as a result of the Bekok C gas platform fire, offshore Terengganu, in December.

Due to the loss of some 5% of gas supply from Bekok which would affect its gas processing and transmission revenue as well as revenue from extracting propane and butane, OSK Research cut its net profit forecast for Petronas Gas by 0.4% for FY11, 3% for FY12 and 1.4% for FY13, which in turn reduced its target price slightly to RM13.54 from RM13.65.

The Bekok C gas platform, located some 200km off Terengganu, caught fire during a scheduled shutdown on Dec 14, 2010, disrupting some 150mmscfd of gas supply for a period of 12 months or more.

"While Petronas Gas will try to source gas from the Malaysia-Thai Joint Development Area (JDA) and the Malaysia-Vietnam Commercial Agreement Area (CAA) as well as Indonesia’s Natuna field, we do not expect the entire 150mmscfd to be recovered that easily," OSK Research said in a report today.

"Assuming that even with gas from other sources, some 125mmscfd is taken off the Peninsular Gas Utilisation (PGU) pipeline network, this will reduce gas processed by Petronas Gas by 5.7% from the 2,178mmscfd for FY09," it added.

However, Tenaga Nasional Bhd has requested for 200mmscfd out of the 400-500mmscfd, which would be imported from 2012 onwards via the liquefied natural gas importation terminal in Malacca. This supply is expected to be available from end-2012 onwards and would boost FY14 profits and beyond.

OSK Research maintained a buy call on Petronas Gas, with some 20% upside.

Tuesday, 25 January 2011

Bangladesh to buy 1.1 mln tonnes fuel from Malaysia

Bangladesh Petroleum Corporation (BPC) will import about 1.1 million tonnes of fuel oil worth $429 million from Malaysia, a senior official said on Monday.

"We are expecting approval of the government purchase committee soon to place order to buy the oil from Malaysia's state-run oil company Petronas ," said Anwarul Karim, chairman of state-managed BPC, the lone oil importer and distributor of oil in Bangladesh.

The fuel -- including 940,000 tonnes of octane, 120,000 tonnes of kerosene and 20,000 tonnes of jet fuel -- is needed to meet Bangladesh's demand during the second half (January-June) of the current fiscal year, he said.

Karim told Reuters that Bangladesh's oil imports would rise by at least 35 percent to 4.85 million tonnes in the 2010-11 fiscal year, from 3.6 million tonnes in the previous year.

The rise is mainly due to higher demand of oil-fired power plants, officials said.

Who loses when contractors become ‘concessionaires’?

ON paper, there is little that can be wrong with a strategy that opens up the exploitation of marginal oil fields those that have already been worked on by others under production sharing contracts (PSCs) to local companies in joint venture with foreign partners.

But in practice this is a dangerous precedent which could open up a Pandora's box of problems and ultimately lead to the erosion of the national oil corporation Petronas' role as the sole custodian of the country's oil and gas wealth.

This is a role that Petronas has played admirably well since 1974, contributing perhaps over half a trillion ringgit in various forms to the Government's coffers and enabling expenditures which would not otherwise have been possible.

Successive Governments have therefore sought to maintain Petronas' integrity and independence so that the nation can continue to benefit collectively from its oil wealth by Petronas providing a steady revenue stream instead of this being allocated to individuals through concession agreements.

Strictly speaking, there is one sole concessionaire to the country's oil and gas wealth Petronas. Everybody else works for Petronas to extract the oil. A proportion goes to the exploration company as cost oil and the rest is divided under a contract agreement, details of which are not divulged publicly.

In the market, Petronas is known to drive a hard bargain. Over the years, it has developed its own exploration capabilities and now produces oil in many locations around the world. All these are to Petronas' credit.

But it should be careful with the latest move to award billions of ringgit in contracts for marginal fields to local companies in partnership with foreign companies.

Oil services companies such as Sapura Crest or Kencana Petroleum, although they are linked to powerful people, do not have the capability or capacity to undertake oil exploration, even if these are marginal fields.

Their only hope is if they go into joint venture with foreign companies which have the capability of extracting oil profitably from marginal fields. That's a specialised area of operation and profit margins are lower than for ordinary producing fields.

These companies push a hard bargain with Petronas to ensure their margins and they are not likely to part with their hard-earned money with local partners that are effectively sleeping partners and want to learn the ropes from them.

This is a zero sum game if somebody else gains, someone else has to lose. Unless the foreign partners had pretty fat margins to start with, they are not about to have their margins sliced any thinner for any third party that brings no value to the table but threatens to dice off a significant chunk of profits.

It is one thing requiring foreign companies to use local contractors for oil field services. They can recover this through the so-called cost oil deducted for exploration and other costs. It is quite another to force them to take a local partner to siphon part of their profits too.

It is pretty obvious what these foreign partners would do extract concessions (pardon the pun) from Petronas in return for taking local partners. Petronas might as well directly give money to these local companies instead!

The only way to do this is to let anyone compete openly for marginal fields, with some slight, clearly prescribed preferences for local companies or those with JVs with local companies. And then give the contract to the best bidder.

We must realise that large rewards come with large risks and competition breeds competence. Otherwise, Petronas' latest bid to award multi-billlion-ringgit marginal oil fields to local companies will become just another means of dispensing patronage.

Worse, this opens up avenues for Petronas to be pillaged and plundered, eventually seriously undermining its role of raising valuable revenue for the Government.

Monday, 24 January 2011

Iran discovers huge gas field in Gulf

Iran has announced the discovery of a new field in the Gulf with giant gas reserves worth an estimated $50bn, Fars news agency has reported. The new 'Khaiyam' field, located to the East of the Assalouyeh region in Southern Iran, has 260 billion cubic meters of in-place gas reserves, oil minister Seyed Massoud Mir-Kazzemi said, adding that 80% of the gas reserves (210 bcm) of the field are considered recoverable. - AME

Sunday, 23 January 2011

Petronas Gas price estimate lowered

Petronas Gas Bhd, a Malaysian natural gas distributor, had its share estimate cut to RM13.54 from RM13.65 at OSK Research Sdn Bhd, which said in a report today that the impact from the Bekok C gas platform fire in December was “worse than we had originally suspected.”

Some 125 million cubic feet per day of gas may be out of action for at least 12 months, OSK analyst Chris Eng wrote in the report.

The research house said it cut its 2012 financial earnings estimate by 3 per cent. -- Bloomberg

Friday, 21 January 2011

Petronas’ multi-billion ringgit job award likely by end of the month

Petronas is expected to award multi-billion ringgit contracts for the development of marginal oil fields by the end of this month to several consortia comprising local and foreign companies.

It is also believed that Petronas will unveil a new business model on the development of the marginal oil fields and possibly, more incentives for the industry.

“The local players will tie up with foreign oil and gas majors in a consortium where the former would have a minor role as it is something new to them. The locals need to learn,” said an industry source.

“Moreover, substantial financial resources are required. (But) This is an opportunity never presented to local companies. They have always been contractors; now they stand to become concession holders.”

The likely victors of the jobs to develop marginal oilfields will come from across the industry as it would involve “different segments of the industry's full value chain”.

“All legitimate players will have a strong role to play,” said the industry source.

According to a source, Petronas the key agency driving this exercise will award these jobs to industry players based on two key criteria: balance sheet and competence/track record. This is because the development of these oilfields carry operational risks and require hefty investments.

In recent weeks, such news have stirred excitement in the sector with oil and gas stocks logging in substantial gains with heavy trading volume.

It is believed that Kencana Petroleum Bhd and SapuraCrest Petroleum Bhd may form an alliance together with a foreign oil and gas major.

SapuraCrest and Kencana have been busy raising capital to fund their expansion plans and are widely speculated to be one of the front runners.

“We are excited ... this would likely involve participation of several local service providers (with strong balance sheet, proven track record and execution abilities and overseas exposure).

“It could also involve strategic tie-ups with independent oil majors and prospecting of strategic assets (floating structures) to develop the marginal fields. If realised, we foresee a re-rating in valuations on the stocks involved in this area,” said Maybank IB Research.

Other potential beneficiaries, according to industry analysts, include Tanjung Offshore Bhd, Petra Energy Bhd, Malaysia Marine and Heavy Engineering Bhd and Perisai Petroleum Teknologi Bhd.

“This will provide more sustainable and predictable cashflow for companies rather than lumpy contracts which most of them are involved in right now,” said an analyst.

The announcement by Petronas is highly anticipated, not least because it marks a major shift in the industry for the first time, Petronas will open up the country's marginal fields to unconventional operators and that too, not just to foreign companies.

“Petronas is looking at different ways of doing business. The concern before has always been deliverability of projects by domestic companies.

“So, local companies have been urged to tie up with foreigners. This would be the second paradigm for the country's oil and gas sector,” said the source.

Enhanced oil recovery and marginal field development are part of the key thrusts under the Government's Economic Transformation Programme.

There are about 25 marginal fields that have been identified, of which 10 including Sepat, Cendor Phase 2 and Berantai are ready for development this year. The total production for these marginal fields are expected to reach 1.7 billion barrels of oil equivalent to a total investment of RM70bil to RM75bil.

“From this, we expect RM5bil to RM8bil worth of contracts to be rolled out in 2011,” said TA Research.

“The whole plan to develop harder-to-reach or marginal oil fields also has some major risks that need to be mitigated as it involves the country's assets. Malaysia can't afford to wrongly execute the plan,” said an observer.

Exxon, Shell to Invest $5 Billion in Malaysia

Energy companies Exxon Mobil Corp. and Royal Dutch Shell PLC plan to invest a total of about $5 billion in Malaysia, the government said Tuesday.

The agreements come as Malaysia seeks to attract $444 billion in investments by 2020.

The largest deal disclosed Tuesday involves units of Exxon and Malaysian company Petroliam Nasional Bhd., or Petronas. ExxonMobil Exploration & Production Malaysia Inc. and Petronas Carigali intend to invest more than 10 billion ringgit, or about $3.25 billion, in new oil and natural-gas assets in the South Asian nation, the Malaysian government said in a written statement.

Shell's local arm, Shell Malaysia, plans to invest 5.1 billion ringgit to upgrade, expand or build facilities in the country.

Meanwhile, Malaysia's oil and gas-services provider, Dialog Group Bhd., will lead a consortium to develop a five-billion-ringgitt deepwater gasoline terminal in Johor state. Members of the consortium include the state government and Vopak NV, a storage company for oil products and chemicals that is based in the Netherlands.

Malaysia, which produced 657,700 barrels of oil and condensates per day as of Jan. 1, 2010, is expected become a net oil importer by 2013.

In November, Prime Minister Najib Razak introduced a package of tax incentives to boost oil production from mature fields, including cutting tax rates for the development of new oil and natural-gas resources and enhancing recovery from depleted fields.

The tax incentives will cost the country eight billion ringgit in foregone revenue for state oil corporation Petronas, which accounts for almost half of all government revenue, Mr. Najib said then.

Thursday, 20 January 2011

Sudan Referendum Poses Dilemma for Malaysia's Petronas

The ongoing referendum on independence for southern Sudan is sending shock waves in faraway Malaysia, in particular, in the upper decks of the iconic Kuala Lumpur Twin Towers, which house the corporate headquarters of national oil company Petronas.

Sudan ranks as one of the most crucial sources of Petronas' international oil-producing assets, which are a major contributor to the company's profits.

But the problem for Petronas is that its success in the country has been tied to its close relations with the ruling government of Sudan's Arab-Muslim north headed by President Omar al-Bashir, while its oil-and-gas-producing fields are located in the largely Christian south, which is pushing for self-rule and independence in accordance with a 2005 peace agreement with the north.

Since Sunday, southern Sudanese have flooded polling stations to cast their votes in a referendum that seeks to have the south break off from the north. And most political analysts and diplomats believe southern independence is inevitable.

"Malaysia and Petronas will have a lot of bridge-building to do if the referendum is carried in favor of independence for the south," said a senior Kuala Lumpur-based oil industry consultant, who has extensive business with Petronas.

In response to queries from The Straits Times, a senior Petronas official said the oil corporation was closely monitoring developments in Sudan and "has taken adequate steps and actions to best serve our rights and interests".

"At the same time, we have had and are in continual discussions and high-level engagements with all relevant officials and parties, including with the government of South Sudan, on our intention and way forward in growing our business," the official said in a written response. Petronas' woes in Sudan underscore the high-risk strategy of the oil corporation's much-envied global campaign.

By venturing into countries where other international oil companies have not been able to enter because of sanctions or political instability, Petronas has developed an impressive portfolio of international oil and gas assets in Africa, Egypt, North Asia and Russia.

According to industry estimates, Sudan is one of Petronas' most lucrative sources for its assets in oil and gas.

The international operations of the oil corporation, which is Malaysia's only Fortune 500 listing, contribute to about 40 per cent of its income and stand as the single largest contributor to group revenue.

But as its Sudan experience is now showing, these international bets carry an expensive downside when the political situation in these countries sours.

There are other potential problems as well. The penchant to do business in highly unstable regions also makes the company an easy target for global pressure groups and exposes it to the vagaries of international financial markets. It has nearly US$20 billion in bonds traded in global markets.

How it navigates through its troubles in Sudan has far-reaching implications for the Malaysian government, which has come to rely heavily on the country's petroleum profits to fund its development plans.

The firm has emerged as a serious player among the world's second-echelon oil majors because of its successful overseas expansion drive.

It began in the early 1990s by piggybacking on former premier Mahathir Mohamad's activist brand of diplomacy, which was rooted in championing Third World causes and investing in economically troubled Islamic countries.

War-torn Sudan was among the oil corporation's first forays abroad.

Foreign companies led by United States-based Chevron discovered oil in Sudan in the 1970s and 1980s, but the civil conflict in the country, attacks from human rights groups and economic sanctions imposed by the US against dealings with the country in 1997 forced many Western oil companies to abandon their investments.

The vacuum paved the way for Petronas and China's China National Petroleum Corporation (CNPC) to move into Sudan, and both firms currently rank as the African nation's largest foreign investors.

According to petroleum industry executives, Petronas and CNPC have righ

Wednesday, 19 January 2011

Malaysia Unveils $22 Billion of Energy, Property, Health Deals

Malaysia unveiled 67 billion ringgit ($22 billion) of private-sector investments spanning energy, property and health, including oil and gas projects by Exxon Mobil Corp. and Royal Dutch Shell Plc.

Exxon Mobil will jointly invest more than 10 billion ringgit in a production-sharing project with Petronas Carigali Sdn., the exploration arm of state oil and gas company Petroliam Nasional Bhd., Prime Minister Najib Razak told reporters outside Kuala Lumpur today. Shell’s Malaysian unit will spend another 5.1 billion ringgit on three projects, he said.

“The feel-good factor for investing in Malaysia is returning,” International Trade and Industry Minister Mustapa Mohamed said. “We have set a target for investments in 2011 amounting to 83 billion ringgit and we’re confident of achieving it.”

Last September, the government outlined $444 billion of potential private company-led projects this decade as part of a so-called economic transformation program. These ranged from nuclear energy to mass rail, and included the oil and gas industry. Najib gave details of 19 of these today.

Exxon Mobil and Petronas Carigali plan to drill existing fields in the Tapis and Telok projects to find new reserves, Najib said.

“Investment in these projects will help develop and deliver energy supplies to meet Malaysia’s growing energy needs,” the prime minister said.

Tax Incentives

The government announced tax incentives in November to encourage companies to explore less-profitable fields in a bid to extend the size and life of the country’s petroleum reserves. Malaysia, Southeast Asia’s second-largest oil and gas producer, has domestic crude oil reserves to last 24 years and natural gas for 38 years, the finance ministry said Oct. 15.

Shell plans a deepwater development off Malaysia’s eastern Sabah state, as well as a diesel-processing unit in Port Dickson, Najib said. The company will also upgrade and expand its Bintulu plant in Borneo, he said.

“Malaysia is one of our heartlands,” Shell Malaysia Chairman Mohd. Anuar Taib said at the event in Putrajaya today. “In the upstream, new reserves and production are getting harder to come by.”

Selangor-based Dialog Group Bhd. will lead a consortium investing 5 billion ringgit in a deepwater petroleum terminal at Pengerang, in Malaysia’s southern Johor state, Najib said, confirming an earlier announcement. The facility will have storage capacity of 5 million cubic meters and is being developed in partnership with the Johor state government and Royal Vopak NV, he said.

‘Tremendous Opportunities’

“There are tremendous spinoff opportunities from the Pengerang project and it will eventually attract adjacent investments worth tens of billions of ringgit from other companies,” Ngau Boon Keat, Dialog’s chairman, told reporters.

In the property sector, Guocoland (Malaysia) Bhd., the property arm of Hong Leong Group, will invest 1.9 billion ringgit in a mixed development in Kuala Lumpur, Najib said. The project will include offices, retail, a hotel and apartments, he said in a statement.

UM Holdings Bhd., a unit of Universiti Malaya, will invest 1.2 billion ringgit in a healthcare development in Selangor, outside Kuala Lumpur, the statement shows. MyTelehaus Sdn., CSF Group and Teliti International will invest a combined 671 million ringgit in data centers, according to the statement.

Tuesday, 18 January 2011

$5bn Santos Queensland project will be a boost for jobs

THE Santos board yesterday signed off on spending $US4.8 billion on the biggest single project in the company's 56-year history.

In a deal that will be transformative for the Adelaide energy company, it will build a $US16 billion liquefied natural gas plant at Gladstone on the Queensland coast.

Santos's international partners - Malaysia's Petronas, France's Total, and Korea's Kogas - will contribute the rest of the money needed to build the project, which will not be finished until the end of 2015.

Petronas and Kogas have also signed up to buy seven million tonnes of gas per year for 20 years, in deals worth more than $US120 billion.

In a piece of good news for Queensland, which the company admitted paled in comparison to the flood tragedy unfolding in the state, the project will create 6000 jobs at the peak of construction, and 1000 permanent jobs while it is in operation.

Santos chief executive David Knox said the floods would have no effect on the timeline for the project, which is expected to export its first gas early in 2015.

Construction is expected to start by the end of March this year.

"The plant, we expect to gain site access by end of this first quarter to start initial work," Mr Knox said.

While drilling for gas at the company's gas fields had stopped due to the floods, this would restart once the water had receded, and construction of the pipeline connecting the gas fields to the plant would not start until next year.

The project involves the development of coal seam gas resources in the Bowen and Surat Basins in south-east Queensland, construction of a 420km transmission pipeline and two gas export facilities with a combined capacity of 7.8 million tonnes per year on Curtis Island at Gladstone.

Queensland Premier Anna Bligh yesterday welcomed the go-ahead for the project.

"Proceeding now with projects like this will be a tremendous boost to the Queensland economy," she said.

Federal Resources Minister Martin Ferguson said the project would make Australia the world's second-biggest LNG exporter by 2015.

Santos shares increased by 2.2 per cent to $13.45 yesterday.

Sunday, 16 January 2011

Ghana sells first oil to ExxonMobil

Ghana, the latest entrant to the club of African oil producers, has sold its first oil exports to ExxonMobil.

The US oil company has bought cargoes of Jubilee crude loading on 1-7 January and 8-18 January from trading companies Vitol and Trafigura, Reuters reported citing unnamed trade sources said.

The price of the trades was not available, it added.

Ghana's Jubilee field produced its first sustained flow of oil at the end of last year. Initial production of around 120,000 barrels per day will rank Ghana as sub-Saharan Africa's seventh largest producer.

Jubilee is estimated to hold up to 1.8 billion barrels and have a lifespan of 20 years.

Saturday, 15 January 2011

Saipem Signs 1.4 Billion-Euro Contract for Kuwaiti Oil Field

Saipem SpA of Italy and Kharafi Group of Kuwait signed a 1.4 billion-euro contract to develop the Jurassic oil field in the Persian Gulf country’s northern region, the official Kuwait News Agency reported.

The field is expected to produce 150,000 barrels of oil a day, and Saipem will operate the field for five years under the contract signed today in Rome, the report said.

Preprations at the field will be completed within three years. Kharafi Group holds the operating license for the field, according to the report.

Friday, 14 January 2011

Norway's Aker sells construction unit to Jacobs

Aker Solutions, Norway's flagship oilfield engineering services group, has sold its process and construction business to Jacobs Engineering Group (JEC.N) for 5.5 billion Norwegian crowns as part of a revamp to streamline its activities.

Aker said it would get net cash of 3.8 billion crowns or $634 million from the deal. Jacobs estimated the purchase price at $675 million cash after certain adjustments, including for debt.

"For Aker Solutions, this represents a further step in becoming much more streamlined and focused on our core oil and gas activities going forward," Executive Chairman Oeyvind Eriksen said in a statement on Wednesday.

The process and construction unit had weighed heavily on Aker's Q3 earnings, which fell 13 percent year-on-year to 880 million Norwegian crowns ($147.6 million) in part because of delays and cost overruns at a power plant the unit is constructing in the United States.

Aker had said earlier this month that it planned two spin offs to free up capital to support growth.

One was the onshore process and construction unit that Jacobs has now agreed to buy.

The other was Aker Contractors, an engineering, procurement and construction (EPC) company focused on North Sea field development that will now take over parts of the process and construction unit excluded from the Jacobs sale.

Eriksen said Aker had considered an initial public offering and public listing of its process and construction business before deciding to sell.

"As the alternatives matured over recent weeks, a sale to Jacobs evolved as the preferred solution industrially as well as financially," he said.

"The price is fantastic," said Arctic Securities' analyst Kjetil Garstad, looking at the deal from the Norwegian firm's point of view.

Sabah to have own training centre on oil, gas

Sabah can expect to have Institut Teknologi Petroleum Petronas (Instep) within two years, Chief Minister Datuk Seri Musa Aman said.

WELL DONE: Musa (left) presenting the Best Student Award to Canicius Kundayis.

Announcing this yesterday, Musa said the educational facility would be built in Kimanis.

“This is Petronas’ promise to us,” he said when officiating at the convocation for 211 Sabahans who graduated from Instep’s Petroleum Technology Programme for the 2007 to 2009 intake.

According to Musa, to have a training centre on oil and gas was a dream for Sabahans especially those in Kimanis as it will provide them with opportunity to study in the field without having to leave the state.

“This augurs well for the state’s oil and gas industry.

“It will also provide many job opportunities for the locals,” he said.

Musa also said the oil and gas industry is among the main contributors to the state’s economy and in 2010, Sabah contributed to 26.9 per cent of the country’s crude oil production.

Sabah, he added, is lucky that Petronas is here to ensure that the valuable natural resource is administered in a responsible way by all Malaysians including Sabahans.

He expressed confidence that the oil and gas industry has the potential to grow even bigger in the future especially with the support of knowledgeable and able human resource.

“Therefore, Petronas’ training programmes conducted through Instep are one of the best platforms to guide the younger generation towards fulfilling the industry’s human resource needs,” he said.

The convocation yesterday was held for Sabahans who graduated from Instep’s Programme Teknologi Petroleum 1 (one year) and Program Teknologi Petroleum 2 (two years).

They were part of the 1,000 students who graduated in the programs.

Since the programs were introduced in 1988, more than 7,000 students have graduated including almost 700 from Sabah.

A majority of them are currently employed by Petronas as well as other oil and gas companies.

Thursday, 13 January 2011

Gas Malaysia eyes Bursa listing this year


Gas Malaysia Sdn Bhd, a company that distributes natural gas to households and industries, is said to be eyeing a listing on Bursa Malaysia this year but that idea has not yet received the full backing of all of its shareholders.

It is learnt that the other shareholders are deciding on whether to green-light a listing but no decision has yet been made.

In a report by OSK Research, it said MMC Corp Bhd during the OSK Asean Corporate Day on Jan 6 in Singapore revealed that it hoped to list Gas Malaysia in 2011. MMC currently owns 41.8% of Gas Malaysia but controls it as a subsidiary.

“We believe the company would be willing to pare down its stake to 20% as long as it can still equity account Gas Malaysia's earnings as an associate,'' it said in a report.

The company's controlling shareholder is MMC and other shareholders of the company are Petronas Gas Bhd, Shapadu Group and Tokyo Gas-Mitsui & Co.

Gas Malaysia is the sole distributor and retailer of natural gas to non-power companies in the country which consume less than two million mmbtu per day.

Analysts feel there would be interest from institutional investors to any flotation of Gas Malaysia given its steady business and cashflow.

“It will be a good dividend yielding stock and the capex risk is quite minimal as it stands. Capital expenditure would be incurred to meet customer demand,'' said an analyst, who added that the main risk surrounding the company would be the security of its gas supply and the margins it obtained.

In its annual latest report, MMC said Gas Malaysia was a steady provider of cashflow to the group. Gas Malaysia reported an 8% decline in pre-tax profit to RM326mil after its customers consumed 4% less gas after a new gas tariff was announced in March 2009. Revenue in 2009 was RM1.75bil compared with RM1.88bil in 2008.

The company in 2009 signed a formal agreement with Petronas for the supply of 300 million standard cu ft per day (mmscfd) of gas which Gas Malaysia said effectively allowed it strategise its long-term business plan more effectively.

Malaysian Rating Corp Bhd in its rating update on Gas Malaysia's debt in August last year said the company faces an ongoing challenge of securing more gas to meet the growing demand of its consumer, commercial and industrial customers.

It said the gas utility managed to secure an additional 82 million mmscfd on top of the current 300 mmscfd in December 2009 until December 2011. Although the additional gas supply addresses current supply constraints to some extent, MARC believes the long-term security of supply remains a key business issue.

“The expiry of its gas supply agreement in 2012 further exposes Gas Malaysia to contract renegotiation and gas supply risks. MARC draws comfort from the essentiality of Gas Malaysia's role as the sole piped natural gas utility in Peninsular Malaysia, which in turn supports the rating agency's expectation that the utility will continue to receive strong regulatory support,'' it said in its report.

Tuesday, 11 January 2011

Quarter of the nation's crude oil from Sabah

Sabah contributed more than quarter of the nation's crude oil last year.

Chief Minister, Datuk Seri Musa Aman said the State chipped in about 26.9 per cent of the country's overall crude oil output, which totaled more than 637,000 drums daily.

The oil and gas industry was one of the main contributors to Sabah's economic sustainability, he said, adding many large-scale projects in the sector have been developed.

"These includes the Kikeh Oil Field, which is the first offshore deepwater oil field in Malaysia and the Sabah Oil and Gas Terminal (SOGT) in Kimanis as the industry's hub in the State's West Coast," he said during the Petronas Petroleum Technology Institute (Instep) 2010 Convocation, Saturday.

"I am confident the sector has the potential to grow even further in future."

In the same breath, Musa said such development could only be achieved with skilled and experienced labour such as those produced by national oil company Petronas.

"The training programme by Petronas through Instep is a good platform to guide the younger generation to fulfill the human capital demand in this industry," he said.

The Chief Minister presented certificates to 211 Sabahan trainees who completed a two-year Petroleum Technology Programme (PTP) that started in 2007 at the Instep campus in Kuala Terengganu.

Many of the students took the one-year PTP1 course while the rest went through the two-year PTP2 that consisted of six fields namely electrical, instrumentation, mechanical, laboratory/analytical, process and distribution.

These Sabahans are part of over 1,000 trainees who completed the PTP, with the convocation here being the third held for this batch, the first being in Kuala Terengganu and the second in Miri last year.

Musa called on the graduates, a majority of them already employed with Petronas subsidiary company, Petronas Carigali Sdn Bhd, not only to respond to the industry's demands but also to propel oil and gas to be one of the core thrusts of Sabah's economic development, towards a higher income economy as envisioned in the Economic Transformation Programme.

"The State Government appreciates the commitment by Petronas to make highly skilled and competitive human capital out of Sabahans for the industry and other sectors as well," he said.

Meanwhile, Petronas Vice-President for Downstream Operations, Kamarudin Zakaria said having been introduced in 1988, the PTP1 and PTP2 have produced more than 7, 000 graduates, with almost 700 coming from Sabah.

He also said the company's technical education in the State was not only limited to Instep alone but that Petronas also ran other training programmes like installation of gas pipes at the Industrial Training Institute here and structure welding at the Commercial and Technical Training Institute in Papar, among others.

Earlier, Musa also presented the Best Student Award to Canicius Kundayis, a student in the laboratory/analytical course from Tamparuli, who earned a CGPA score of 3.87. The 23-year-old chose oil and gas as his career because of the industry's potential.

He advised those looking to make it in the industry to have a strong will, pointing out it was a challenging sector to work in.

Also present at the convocation were Petronas Sabah and Labuan General Manager, Joseph Podtung, Petronas Human Resource Management, Distribution and Development General Manager, Raiha Azni Ahd Rahman and Instep General Manager, Hj Mohd Zazali Salim.

Monday, 10 January 2011

BP, Halliburton Likely to Face Criminal Charges Over Spill

In light of the presidential report on the Gulf oil spill that's due to be released next week, speculation is running rampant that the companies involved -- BP, Halliburton, and Transocean -- could soon be facing criminal charges.

It seems only fair that the companies that caused the largest offshore environmental disaster in US history should be made to face trial, though no individual is likely to do any time as a result. Here's the story, from the Associated Press:

Months of investigation by a presidential commission and other panels reinforce the likelihood that companies involved in the Gulf oil spill will be slapped with criminal charges that could add tens of billions of dollars to the huge fines they already face, legal experts said Thursday ...

"The evidence of negligence is too compelling and the harm is too great," said David Uhlmann, former chief of environmental crimes at the Justice Department. "The Justice Department is likely to believe that BP, Transocean and Halliburton were negligent and should be criminally charged. There's no question about that."

Since the reports don't name any particular individuals who acted negligently, no blame is likely to be levied any specific people. Instead, the criminal charges are likely to wring heftier fines from the negligent companies.

The AP notes that "Under the Clean Water Act, BP, alone, already faces up to $21 billion in civil fines." Environmental law expert Gregory Evans "noted that under the Alternative Fines Act, a criminal prosecution would pose the threat of a criminal fine equal to twice the aggregate financial losses caused by the offense."

One study found that the damage to the Gulf tourism industry was likely to amount to $22.7 billion over the next three years -- meaning the guilty companies would have to fork over $45 billion in criminal fines.

Much of this remains speculation, however -- which charges, if any, the negligent companies get hit with remains entirely up in the air.

Petronas Chemicals Falls After Malaysian Plant Fire

Petronas Chemicals Group Bhd., a unit of Malaysia’s state oil and gas company, fell to a two-week low in Kuala Lumpur trading after a fire halted operations at its plant.

The shares fell 0.7 percent to 5.51 ringgit at 10:52 a.m., set for their lowest close since Dec. 8. The fire which occurred Dec. 24 at an aromatic plant within its petrochemical complex in Kertih in the eastern state of Terengganu was extinguished “shortly after,” the company said. The plant has been closed as a safety precaution pending an investigation, it said.

An extended closure of the plant will cause “material impact” to Petronas Chemicals because the facility manufactures two products that jointly generated about 20 percent of the company’s revenue in 2009, according to a Maybank Investment Bank Bhd. report today.

Maybank estimated that each day of the plant closure will cost the company 6.1 million ringgit ($2 million) in lost revenue, on top of 1.2 million ringgit in fixed cost.

“This is the third day of plant closure, and therefore the total losses amount to 21.9 million ringgit since the fire broke out,” Maybank said in a note to client. Maybank said it doesn’t expect the incident to lead to force majeure, a legal clause invoked by companies when they can’t meet obligations because of circumstances beyond their control.

Siti Azlina A. Latif, a spokeswoman at Petronas Chemicals, said today that the company has no further comments.

Petronas Chemicals, a unit of Petroliam Nasional Bhd., was listed in Malaysia last month after raising 12.8 billion ringgit in the Southeast Asian nation’s largest initial public offering. The share sale was part of Prime Minister Najib Razak’s plan to attract more overseas investment by selling state-owned assets.

“We remain optimistic of Petronas Chemicals and this fire has not dented any of its solid long-term fundamentals,” Maybank said. “We are still buyers of Petronas Chemicals and think that any steep price decline represents an opportune moment to buy.”

Saturday, 8 January 2011

Qatar's Barzan gas project launched

Qatar has launched QR31bn Barzan Gas, a key project that will significantly meet the rising domestic gas demand.

Qatar Petroleum and ExxonMobil Barzan, a subsidiary of ExxonMobil Corporation, yesterday signed a Joint Venture Agreement (JVA) and a Development and Fiscal Agreement (DFA) for the Barzan Gas Project, which will supply about 1.4bn cu ft of gas a day, mainly to utilities and industrial units.

QP will have a 93% stake with ExxonMobil holding the remainder in the project, whose first gas flow is planned for 2014.

The project will be completed in two phases; Train 1 will come onstream in 2014 and Train 2 in 2015.

To be located at Ras Laffan, Barzan Project will be operated by RasGas. It will produce and process gas from Qatar’s North Field and supply sales gas to power stations and industries, ethane to the petrochemicals industry in Qatar, and associated liquid hydrocarbons for sale in the local and international markets.

The engineering, procurement and construction (EPC) contract for the project’s onshore segment has been awarded to Japan’s JGC Corporation while the offshore works have been given to South Korea’s Hyundai Heavy Industries.

The agreement was signed for QP by HE the Deputy Premier, Abdullah bin Hamad al-Attiyah, and for ExxonMobil Corporation by Andy Swiger, senior vice-president in Doha yesterday.

Al-Attiyah said the project would play a “critical and strategic role” in sustaining the high growth rate of the Qatari economy.

The Barzan project is scheduled to come on stream in 2014, in time to meet the accelerating local gas demand. A major portion of the gas to be supplied by Barzan Gas will be used by the power and water generation sector. In oil equivalent, the project will produce 300,000 barrels per day (bpd), which al-Attiyah said is “very significant”.

Describing ExxonMobil as Qatar’s “valuable partner”, he said the project will further strengthen QP’s successful partnerships with EM in the LNG ventures in RasGas and Qatargas and the Al Khaleej Gas projects.

Swiger said: “The Barzan project represents another major step in our long and successful relationship with Qatar Petroleum. This new domestic gas project will support Qatar’s economic growth and will create and deliver sustainable, long-term benefits for the Qatari community.”

Philippines : Oil companies slash LPG prices

Four oil companies have lowered the price of cooking gas, or liquefied petroleum gas (LPG), to reflect the decline in the fuel’s international contract price.

Petron Corporation, Pilipinas Shell Petroleum Corporation, Petronas and Total Philippines lowered the price of their cooking gas brands by 40 centavos per kilogram beginning Tuesday morning. This brings down the price of 11-kg LPG cylinders sold by these companies by at least P4.40.

The suggested retail price of one of Petron’s Gasul tanks now stands at P714.50. Cylinders were previously sold for in between P700 to P720 depending on location and proximity with competing brands.

On the other hand, Chevron Philippines did not announce any price cut for its LPG products. According to Chevron spokesperson Toby Nebrida, this is because the company no longer has control over the LPG products sold at its retail stations.

“Chevron divested from the LPG business in 2007 and sold its assets to Petron. They now own it and are receiving profits from it,” Nebrida clarified.

Other retailers, especially members of the LPG Marketers Association (LPGMA), have yet to lower their LPG prices.

The LPGMA is made up of Pinnacle Gas, Cat Gas, Omni Gas, Nation Gas and Island Gas, who altogether hold a third of the gas market in Luzon.

According to LPGMA party-list Representative Arnel Ty, the group will not post any price adjustments unless a more substantial decline in global prices is noted by January 15. He added that if ever, a price rollback will be implemented later this month, or in February.

"We’re waiting for January 15 to see if the trend is down,” Ty earlier said. “Probably oil companies will not wait until February.”

He added that the price rollback by the big oil companies was “not a reflection of the movement in international market prices but rather a marketing move,” to bring their LPG prices up to par with LPGMA prices.

LPGMA products currently cost around P600 to P680. - POC

Friday, 7 January 2011

BP, Transocean, Halliburton blamed by presidential Gulf oil spill commission

By Steven Mufson
Washington Post Staff Writer
Wednesday, January 5, 2011; 6:01 PM

The presidential oil spill commission on Wednesday blamed the Gulf of Mexico oil spill last year on "missteps and oversights" by oil giant BP, rig owner Transocean and contractor Halliburton, saying those errors were "rooted in systemic failures" and could happen again.

The commission said that the April 20 blowout at BP's Macondo well was not inevitable, but rather a failure of management in which officials from all three firms ignored critical warning signs and failed to take precautions that might have delayed the completion of the well but also might have averted the environmental disaster.

In a chapter released from the final report due out next week, the commission said: "The blowout was not the product of a series of aberrational decisions made by rogue industry or government officials that could not have been anticipated or expected to occur again. Rather, the root causes are systemic and, absent significant reform in both industry practices and government policies, might well recur."

The document provided a detailed account of the missteps that led to the spill, but most of the details have been revealed in other reports or investigations so far. It recounts fateful decisions by all three major corporate actors, including the failure to use enough centralizers to keep the pipe in the middle of the well, choices about the type of steel pipe used, and failure to heed or share test results suggesting that the cement used to seal the well could fail.

In the case of the failure to use enough centralizers, the report said that "the evidence to date does not unequivocally establish whether" that was a "direct cause" of the blowout, but the commission said that it "illuminates the flaws in BP's management and design procedures, as well as poor communication between BP and Halliburton."

William K. Reilly, co-chairman of the commission appointed by President Obama, said that the commission had concluded that the blowout reflected "a more pervasive problem" within the oil industry.

"Given the documented failings of both Transocean and Halliburton, both of which serve the offshore industry in virtually every ocean, I reluctantly conclude we have a system-wide problem," Reilly said.

Thursday, 6 January 2011

Nexant Facilitates World’s Largest Chemicals IPO

Nexant announced today that its Energy & Chemicals Consulting (E&CC) team played an instrumental role in two major chemical industry initial public offerings—the recently completed IPO for Petronas Chemicals Group Bhd., the petrochemicals unit of Malaysia’s state oil company, and the recent IPO for AZ Electronic Materials (AZ EM), owned by Carlyle/Vestar.

Petronas Chemicals raised $4.1 billion in the world’s largest chemicals IPO to date. The AZ EM IPO surged on its debut, with a valuation of $1.5 billion.

The Nexant team—headed by Lee Fagg (Nexant Asia, Bangkok) and Jane Smith (Nexant Limited, London)—delivered business, commercial, and market assessments that were critical to the successful completion of both IPOs.

Nexant was chosen for its depth of industry knowledge, unique breadth of experience across all chemical sectors, and unparalleled transaction experience. The company’s E&CC business unit provides high-quality consulting services to the gas, downstream oil, clean energy, biofuels, chemicals, and fertilizer industries.

“Our professionals have been providing advisory services to global energy and chemical clients for over 40 years,” said Dr Andrew Spiers, Nexant Senior Vice President for Asia.

“Nexant is recognized for its unique ability to offer clients both in-depth analytical expertise and access to the most extensive proprietary databases in the industry. In addition, our ChemSystems Online platform ( enables clients to model and simulate the entire global chemical industry as well as to forecast consumption, production, supply and demand, pricing, and profitability of key chemicals for every commodity chemical plant in the world.”

Nexant’s extensive consulting capabilities include:

* Corporate strategy development
* Process and business benchmarking and optimization studies
* Mergers and acquisitions—industry adviser support
* Project planning and feasibility
* Technology evaluation/development assistance
* Market evaluations including addressable market appraisals
* Independent technical and commercial due diligence to support financial transactions
* National and regional master plans

About Nexant

Nexant, Inc. is a premier provider of software and consulting services for the next-generation intelligent grid and clean energy solutions. For the last decade, it has been developing and commercializing technology solutions—such as TrakSmart®, GridSmart®, HEDGE®, COMET®, and RevenueManager™—enabling utilities, power producers, and retailers to operate and deploy new technologies and applications in the emerging grid. Operating from 30 offices in the U.S., Europe, the Middle East, Asia, and Africa, the company's team of industry professionals has completed more than 2,500 client assignments in over 100 countries, and its software operates in over 120 control centers at utilities worldwide. Its clients include major utilities, transmission and distribution system operators, chemical and petroleum majors, financial institutions, government agencies and Fortune 500 companies. For additional information, please visit

Wednesday, 5 January 2011

RON97, minyak tanah naik 10 sen lagi

Harga petrol RON97 dan minyak tanah masing-masing naik 10 sen seliter mulai tengah malam ini, kata Presiden Persatuan Penjual Petrol Malaysia (PDAM), Datuk Hashim Othman.

Katanya, ekoran kenaikan itu, harga petrol RON97 naik kepada RM2.40 seliter manakala minyak tanah kepada RM2.50 seliter.

azlanHashim yang dihubungi berkata beliau dimaklumkan mengenai kenaikan harga kedua-dua minyak tersebut oleh pihak berkuasa malam ini, lapor Bernama.

Kali terakhir harga RON97 yang diapungkan mengikut pasaran minyak dunia semasa, naik sebanyak 15 sen pada 1 Disember lalu, menjadikan RM2.30 seliter.

Kenaikan tersebut tidak akan menjejaskan harga petrol RON95 yang kekal RM1.90 seliter, diesel RM1.80 seliter dan LPG RM1.90 sekilogram.

Menurut laporan hari ini, minyak yang dikeluarkan oleh Pertubuhan Negara Pengeksport Minyak (Opec) meningkat kepada US$89.79 mulai minggu ini.

Harga petrol RON 97 sejak tahun lalu, tidak ditetapkan kerajaan kerana ia diapung mengikut pasaran minyak dunia semasa.

Pada 1 November lalu, harga petrol RON97 dinaikkan 5 sen menjadi RM2.15 seliter dan akhir bulan yang sama ia dinaikkan lagi 15 sen lagi kepada RM2.30 seliter. - MalaysiaKini

Tuesday, 4 January 2011

Oil seen hitting US$100 a barrel this year

Will we see oil price exceed US$100 in 2011?

Quite likely, say analysts, as more quantitative easing by the US Government, coupled with strong demand from India and China drive oil prices to the three-digit level again.

In 2010, base metals took centre stage with most industrial commodities and precious metals trading at, or near record highs.

Oil prices, however, were not in the spotlight and had a relatively benign year.

The benchmark West Texas Intermediate (WTI) spot price of crude oil began the year at $81.74 per barrel, slipped to a low of US$64.78 in May before climbing to to an intraday high of US$91.88 on Dec 27. (Oil closed at the highest level of US$91.63 on Dec 23). Thus, oil has increased only 13% this year.

Nonetheless, oil prices have jumped almost 30% since September.

Some say the current rally set in around September after the US Federal Reserve embarked on its latest quantitative easing (QE), which triggered a wave of buying in financial markets across the globe.

(QE refers to the Federal Reserve's efforts to jump-start the economy and stave off deflation by buying back US$600bil in Treasury bonds, hence putting more money into the system. Some analysts are watching what happens next, after the current bout of QE stops sometime middle of this year).

However, there are others who believe that oil prices are set globally, and they are rising due to demand from a rising middle class in the emerging markets.

“China has been buying up commodities and resources around the world. It is a matter of time before oil rises again,” said strategist from a foreign brokerage.

Opec's evident reluctance to increase output and the prospect of continued dollar weakness are additional factors in the case for costlier oil in 2011.

In a report by the International Energy Agency, the cold weather had pushed oil prices to two-year highs over US$90 per barrel by early last month.

While some may believe there is a fundamental reason for the price uptrend, not all will agree on its benefits.

Oil is, after all, a major input cost.

“If oil prices continue to go up, it will be more than just higher petrol prices that we have to worry about.

“Everything else will get more expensive. This will result in higher consumer price inflation, which could mean interest rates rising again,” said the strategist.

A fund manager, who felt that there was too much pessimism on the US economy, said oil prices could ease as the US dollar started strengthening this year.

“Oil prices may even go lower. China's energy needs might not be as robust as previously thought. A recent crackdown on bank lending could dampen some of its recovery and its appetite for oil,” said the fund manager.

A Hong Kong-based fund manager expected commodity prices to make their next big move sometime this year,

“Already, we are seeing fresh all-time highs in tin, copper, zinc, and other industrial materials. We are seeing this because of the massive infrastructure development in China and India and the global switch to alternative energy,” he said.

The demand for certain commodities cannot be viewed in isolation, the fund manager explained. This is because one type of commodity may be required to produce another type of product .

“In the push for alternative energy, people use water to generate electricity. To create this alternative energy, they still need existing commodities. They still need to build the dam, which requires iron ore and copper, among others.”

“As copper price rises because of increasing demand, the cost of copper equipment will increase. This increases the cost of mining copper, and eventually leads to higher prices for oil and other commodities as well,” explained the fund manager.

Sunday, 2 January 2011

Petrofac wins RM864m Petronas Carigali job

Petronas Carigali Sdn Bhd has awarded a US$280mil (RM863.6mil) contract to Petrofac, the international oil & gas facilities service provider for the development of the Sepat offshore early production system on the east coast of Peninsular Malaysia.

The award followed a competitive tender and first oil is expected before the end of 2011.

Petrofac will undertake the engineering, procurement, construction, installation and commissioning (Epcic) for the full scope of the early production system in a water depth of about 65m.

The Epcic will comprise of a mobile offshore production unit (Mopu), a floating storage and offloading (FSO) facility for the early production of 20,000 barrels of oil per day, and all interconnecting sub-sea pipelines.

Petrofac group chief operating officer Maroun Semaan said: “We are delighted to have been awarded this contract by Petronas, which is our first lump-sum offshore Epcic contract in South-East Asia.

“The award reinforces our commitment to the region and enables the continued growth of our local delivery capability to support our ongoing relationship with Petronas and other regional partners,” he said on the company's website yesterday.

Local partners supporting Petrofac on this project are Kencana HL, which will add all the processing equipment to the Mopu, and Bumi Armada which will supply and install the FSO.

Saturday, 1 January 2011

Shell, Qatar in Petrochemical Deal

Energy major Royal Dutch Shell plc (RDS.A - Analyst Report) has entered into a memorandum of understanding with state-run Qatar Petroleum to jointly study the development of a multibillion-dollar world-class petrochemicals plant in the industrial city of Ras Laffan, Qatar.

As per the deal – signed in Doha by His Excellency Abdulla bin Hamad Al-Attiyah, Deputy Prime Minister and Minister of Energy and Industry of the State of Qatar, and Peter Voser, Chief Executive Officer of Shell – the companies will build a mono-ethylene glycol (“MEG”) facility with a capacity of up to 1.5 million tons per year using Shell's proprietary OMEGA (“Only MEG Advantaged”) technology. Together with other specialty chemicals, the complex will yield more than 2 million tons of finished products annually.

MEG is an important raw material for industrial applications, especially used to make polyester resins, films and fibers. Additionally, MEG is important in the production of antifreezes, coolants, aircraft anti-icer and deicers as well as solvents.

The Hague-based Shell, the largest foreign investor in Qatar, is already involved in the Pearl gas-to-liquids development and the Qatargas 4 LNG (“liquefied natural gas”) project – two of the largest initiatives in Ras Laffan – with Qatar Petroleum.

The estimated $6 billion project, which is expected to come online by 2016, will combine Shell's experience and technology with the ambition of the State of Qatar to unlock more value from its natural gas resources, increase its petrochemical production, and expand the downstream industries. Incidentally, the Persian Gulf nation owns the world’s third-largest gas reserves and is the world’s biggest LNG exporter.

Royal Dutch Shell – Europe's largest oil company by market value and ahead of BP plc (BP - Analyst Report) and Total SA (TOT - Analyst Report) – owns one of the largest integrated oil and gas businesses in the world. The group has operations all over the world and is involved in various activities related to oil and natural gas, chemicals, power generation, renewable energy resources and other energy-related businesses.

Royal Dutch Shell ADRs currently retain a Zacks #3 Rank, which translates into a short-term 'Hold' rating. We are also maintaining our long-term 'Neutral' recommendation on the stock.