Dialog expects up to 20% return from US$1.2bil Bayan

Oil and gas services provider Dialog Group Bhd has projected an internal rate of return (IRR) for the Bayan oilfield project located offshore Bintulu to be around the mid-teens to 20% of the costs of US$1.2bil.

The company recently signed a 50:50 joint venture with Halliburton International Inc to redevelop the oilfield over a 24-year period, the second upstream venture after the development of the Balai marginal field cluster, a joint venture with Sydney-based Roc Oil Co Ltd and Petronas Carigali Sdn Bhd, the unit of Petroliam Nasional Bhd (Petronas) involved in exploration.

Dialog's executive chairman Ngau Boon Keat said at a media briefing following the company's AGM that the IRR would depend largely on how much of the oil could be recovered with the available technology.

“If we have the technology that can help push more oil out, then the IRR will be better,” he said, adding that visible growth in the company's upstream oil and gas business would take several years.

Ngau said the venture into the upstream business has been “very positive” for the company with the Balai marginal field (in which Dialog has a 32% stake) having produced first oil before Petronas' second-half 2013 deadline.

He declined to comment on how much barrels of oil equivalent still remained in the Bayan oilfield but said about 30% of the oil has been extracted from the 30-year-old field. Ngau was also cautious as to whether the Bayan project value could go up but expects the project to start contributing to revenue from financial year ending June 30, 2014 onwards.

“We're targeting to produce from the oilfield before the end of the year,” he said.

Ngau added that the income from the Balai marginal cluster, in which the company together with joint venture partners have a 15-year risk service contract with Petronas, would only start generating income in four to five years.

Analysts have been positive on the company's upstream venture, which they said would add to the company's recurring income stream.

The company plans to have equal 1/3 contributions to revenue from the upstream, terminal and specialist services from 2016 onwards from the two-thirds contribution coming from specialist services currently.

“This is our plan in terms of revenue contribution as the earnings grow bigger,” Ngau said, adding that the partnerships with companies such as Royal Vopak NV, Halliburton, Roc and Shell brought in the technology especially for enhance oil recovery projects.

Dialog also announced in September an expansion of the company's presense in Pengerang, Johor, where it would be part of a joint venture with Royal Vopak and the Johor state government in the building of a RM4.08bil liquefied natural gas storage terminal.

The company together with Royal Vopak is developing a RM5bil petroleum storage terminal in Pengerang. Both projects are part of Petronas' RM60bil integrated refinery and petrochemical complex expected to be commissioned by the end of 2016.