The country’s credibility as an oil and gas hub and as an investment destination could be at stake as companies hoping to cash in on Malaysia’s oil and gas industry launch increasingly ambitious projects.
A proposal to build a US$100 billion (RM300 billion) trans-Asia oil and gas pipeline by local company PanelPoint Sdn Bhd that links Asean with China received a hostile reception from sceptical members of the media yesterday.
This came just a day after Petronas cast doubts on a Malaysian-Iranian-Chinese joint venture led by Sabio Oil and Gas Sdn Bhd which had announced on July 25 that it was hoping to embark on the development of marginal oil fields off the coast of Terengganu.
Sabio was forced yesterday to admit that it had no deal yet and had only signed an MoU as a first step.
News also broke last month that the Asia Petroleum Hub (APH) in Johor, which was once billed as one of the world’s largest fully integrated terminals, had been put under receivership by financier CIMB Bank and is now looking for RM2 billion in funding.
The US$10 billion Merapoh oil refinery in Yan, Kedah, announced in 2009, has yet to be built although the Kedah state government was reported in July to have said that it will be carried out by new players after the original initiators ran into financial difficulties.
A US$7 billion trans-peninsula pipeline initiated by Trans-Peninsula Petroleum Sdn Bhd that runs from Kedah to Kelantan, launched in 2007, has apparently either been delayed or cancelled.
It comes as no surprise then that many members of the media, who already tend to be wary when they hear the words “memorandum of understanding (MoU)”, are now jaded when it comes to mega oil and gas projects.
At least one major global newswire declined to cover yesterday’s announcement of the trans-Asia pipeline.
Some analysts are also sceptical given the past track record of such proposals.
“Any oil and gas project that doesn’t involve Petronas is likely to fail in Malaysia,” said Chris Eng, head of research at OSK.
Much publicised ambitious proposals which fail to take off could potentially impact Malaysia’s image abroad.
One analyst, who just returned from meeting counterparts overseas, said Malaysia already tends to be perceived as a country of more talk than action.
Another announcement this week was that of oil and gas companies KNM Group and Zecon after they signed a preliminary agreement with Gulf Asian Petroleum to undertake two projects worth RM17 billion.
Shares of Zecon rose as much as 30 per cent, their biggest one-day percentage gain in nearly two years, while KNM shares rose as much as 9.1 per cent.
The projects, to be constructed in Teluk Ramunia in Johor, comprise a petroleum refinery and a storage terminal worth RM15 billion and RM2 billion respectively.
Though investors cheered the announcement, analysts said they need more clarity on the projects before changing their calls on the stocks.
“There may be a positive knee-jerk reaction (in the share price), but a sustainable rise will hinge on more clarity of the project,” HwangDBS Vickers research analyst Quah He Wei said in a note quoted by Reuters.
OSK Research said it had doubts on the feasibility of the project.
“We harbour some doubts on whether the project will take off due to past events,” OSK Research said.
“In March 2008, Qatar-based Gulf Petroleum Ltd’s plans to construct a US$5 billion oil and gas complex in Malaysia petered out even though it had earlier signed an agreement with the Malaysian government.”
But despite the pessimism of market analysts and research houses, the forays and attempt to cash in on oil and gas continue unabated, especially since the sector is one of the 12 National Key Economic Areas (NKEAs) under the Najib administration’s Economic Transformation Programme (ETP).
