Malaysia oil & gas: Go big or go home

The US$4 billion merger of two of Malaysia’s larger oil and gas firms, Kencana and SapuraCrest, sent a clear message to their local rivals: size matters.

Small oil and gas services companies dot the Malaysian market and analysts think it makes strategic sense if firms join hands to add value to their portfolio.

“Everyone these days wants to be a one-stop solution provider,” OSK analyst Jason Yap Wah Ming said. As state-owned oil giant Petronas starts calling for bids to develop its oil assets, there will be more M&A deals in one to three years, analysts say.

Likely beneficiaries will be those companies that offer under one roof a myriad of services such as maintenance, fabrication operations, and marine vessel charter.

In the case of Kencana and SapuraCrest’s merger, a natural “fit” was found with Kencana’s vessel fabrication expertise and Sapuracrest’s installation capabilities.

Given the current landscape of the industry, likely buyers include Petronas’ engineering arm Malaysia Marine, which has cash and cash equivalents of RM2 billion.

Already, Malaysia Marine has shown its hand and bought conglomerate Sime Darby’s deepwater fabrication yard in Ramunia for RM695 million.

But as Petronas’ main engineering arm, Malaysia Marine wants to further bulk up in anticipation of more contracts under the new Petronas spending plan, analysts say.

Another possible buyer is integrated service provider Dayang, which is valued at RM1 billion.

It already has diverse set of services and could benefit from scaling up to take on bigger projects. It could also become a target itself for the same reason, according to an oil and gas analyst at TA Research.

“Smaller companies may have expertise in certain segments but do not have capital, so the bigger ones may not mind absorbing them,” OSK’s Yap said.

There may also be mergers among companies in the same subsector to kill competition.

Offshore support vessel firms such as MISC, Alam Maritim and Perdana Petroleum have been cannibalising each other’s charter rates in an overly crowded space and analysts have long maintained that they would benefit from consolidation to improve their margins.

There is already increasing market chatter that companies are eyeing each other.

Malaysian financial daily The Edge reported last week that Perdana Petroleum may sell its 30% stake in Petra Energy, a maintenance provider.

A spokesperson for Perdana Petroleum declined to comment on the possible sale of its stake in Petra Energy.

However, he told Reuters that charter rates did need to improve if offshore support vessel operators were to boost their earnings.

Meanwhile, MISC reported a 71% decline in its Q1 net profits last week mainly due to weakness in its liner business, and said it expected the weakness to continue.

M&A status quo
The Malaysian government has already made sector consolidation a key agenda in its 10-year plan of economic rejuvenation and its control of Petronas can help reshape the industry.

The plan has two targets – to boost supplies of local oil and gas, but more importantly, to establish Malaysia as a key oilfield services hub to boost foreign investment and to raise national income levels.

Despite the impetus for change, mergers and acquisitions between smaller Malaysian oil and gas companies may be easier said than done.

A banker involved with the Kencana and SapuraCrest merger said pitching ideas to smaller companies has been difficult because they are wedded to the status quo.

“They’ve been working under the old regime for so long that unless they change their mindset, they aren’t going to be realistic about valuations,” the banker said.

Sofiyan Yahya, president of the Malaysian Oil and Gas Services Council, agrees and says the government and Petronas will have to drive the consolidation process.

“The environment must be there to receive the new way of doing business,” he said.

“If you don’t broaden the road, why would I want to drive a bigger car?”
At present, Malaysian companies still depend on foreign participation when it comes to large awards such as the recent Balai Cluster contract and the Berantai field contract in January.

For its part, state giant Petronas has accelerated its capital expenditures for field development to RM300 billion over the next five years from RM35 billion in 2010/11, which means there will be plenty of work for oil and gas firms in the months to come.

Petronas on Tuesday announced a US$5.1 billion upstream gas project with its production sharing partners, which include Malaysian companies, that would also see the construction of a pipeline.

A TA Research analyst said that with incoming foreign investments, total capex spending in Malaysia could climb to RM500 billion over a five-year period.

Malaysian companies will have to gear up operationally to make the most of these opportunities.

“Even now, when it comes to the big projects, foreigners are taking chunks and subcontracting to smaller Malaysian players,” Sofiyan Yahya, the MOGS council president, added.

“In future, like a shark, Malaysian companies are going to eat chunks of meat” and not “nibbling at bits and pieces.”

The goal is to eventually create regionally competitive firms that are less dependent on Petronas, which tailors contracts specifically for Malaysian companies.

“Consolidation needs to be done,” Sofyan added. “In Malaysia, if they want a cup of coffee… tenders are given out for the spoon, the coffee and the saucer. When you go overseas, they want to know you can just supply a cup of coffee.”

- Reuters

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Kelantan tuntut hak gas di utara ‘Malay Basin’

Kerajaan negeri Kelantan menegaskan bahawa kerajaan pusat tidak boleh mengenepikan haknya terhadap pembangunan gas yang tersimpan di dasar laut di utara ‘Malay Basin’ yang dianggarkan bernilai RM15 bilion.

Exco kanan Datuk Husam Musa berkata utara ‘Malay Basin’ merangkumi blok PM 301, PM 302 serta telaga Bergading sepenuhnya berada dalam perairan Kelantan dan tidak bertindih dengan mana-mana negeri atau negara lain.

“Jaraknya dengan pantai Kelantan hanya 150 km sahaja dan paling hampir berbanding negeri Terengganu,” katanya dalam satu kenyataan media hari ini.

Naib Presiden PAS itu merujuk kepada laporan media pada 23 Ogos lalu berhubung kenyataan Petronas mengenai pembangunan pengeluaran gas di utara ‘Malay Basin’ yang akan disalurkan dengan paip didasar laut yang baru sejauh 200 km ke Kerteh, Terengganu.

“Adalah tidak wajar Kelantan tidak dirundingi dalam hal ini. Juga adalah tidak wajar sekali lagi Kelantan dipinggirkan dari mendapat faedah secara langsung daripada pembangunan hasil mahsul yang dianugerahkan Allah SWT yang tersimpan di perut bumiNya.

“Dalam hal ini, lebih elok jika Petronas meneliti semula dokumen cadangan kerajaan negeri Kelantan supaya gas ini didaratkan di Bachok, Kelantan,” katanya.

Beliau berkata, kerajaan negeri bersedia memberikan segala kemudahan bagi tujuan itu termasuk teknologi terkini yang mampu memproses gas dengan kandungan karbon yang tinggi dengan kos lebih murah dan dengan itu loji pemprosesan dapat ditempatkan di sini.

Kerajaan negeri menurutnya, akan berbuat apa sahaja supaya hasil mahsul Kelantan ini tidak sekali lagi diangkut keluar tanpa memberikan apa-apa faedah kepada rakyat dan negeri Kelantan.

Jual Esso kepada firma Filipina bukti kerajaan terus gagal

PAS memandang serius cadangan penjualan Esso Malaysia Berhad dan syarikat berkaitannya kepada San Miguel Corporation — sebuah syarikat Filipina — dan mendakwa ia satu lagi kegagalan kerajaan Barisan Nasional (BN) mempertahankan kepentingan negara dalam industri strategik.

Presidennya Datuk Seri Abdul Hadi Awang (gambar) berkata urusan jualan itu jika diteruskan akan memberi kesan negatif jangka panjang kepada industri minyak dalam negara.

Baru-baru ini, San Miguel mencadangkan kepada ExxonMobil International Holdings Inc, untuk mengambil alih 65 peratus kepentingan ekuiti dalam Esso Malaysia melibatkan dana RM614.25 juta. Esso Malaysia ialah anak syarikat ExxonMobil International.

San Miguel berkata syarikat itu juga merancang membuat penawaran pengambilalihan mandatori untuk memperoleh baki saham yang tidak dimiliki oleh syarikat selepas cadangan pengambilalihan itu.

Serentak dengan tawaran pengambilalihan Esso Malaysia, San Miguel juga mencadangkan kepada Mobil International Petroleum Corp dan ExxonMobil International untuk mengambil alih ExxonMobil Malaysia dan ExxonMobil Borneo pada paras AS$403.979 (RM1.2 billion) juta.

Cadangan pengambilan alihan itu akan menyediakan San Miguel dengan peluang unik untuk meluaskan portfolio peniagaan penapisan dan pemasaran minyak di luar Filipina.

Awal minggu ini, Ketua Pembangkang Datuk Seri Anwar Ibrahim juga meminta Putrajaya memberi penjelasan mengenai isu tersebut.

“Perlu diingat bahawa urusan niaga itu juga termasuk loji penapisan minyak milik Esso di Port Dickson, yang merupakan aset penting negara.

“Pihak kerajaan melalui pihak berkuasa kementerian yang berkenaan wajib untuk tidak meluluskan urus niaga tersebut dan Esso mestilah menawarkan penjualan asetnya kepada syarikat dalam negara, sebagaimana yang ditawarkan oleh beberapa pihak yang menunjukkan minatnya seperti Lembaga Tabung Angkatan Tentera (LTAT),” kata Hadi lagi.

Hadi menambah, perlu diingatkan bahawa Kongres Amerika Syarikat pernah menghalang penjualan Union Oil of California kepada syarikat minyak milik negara China atas kepentingan strategik.

“Sepatutnya kerajaan yang ada ini, bersama dengan Petronas melalui Petronas Dagangan Berhad bertindak untuk menentukan keselamatan bekalan bahan petroleum dan harga bahan petroleum kekal pada paras yang munasabah.

“Sekali gus Petronas Dagangan juga tidak boleh melupakan peranannya untuk membina dan mempertahankan usahawan-usahawan Bumiputera yang turut menyumbang kepada kerancakan perkembangan ekonomi negara,” katanya.

Kata Hadi, walaupun Petronas Dagangan menduduki tempat pertama dalam pasaran bahan petroleum dan negara, penguasaannya dalam syer peruncitan iaitu pasaran stesen minyak hanyalah sekitar 30 peratus walhal sektor ini dipercayai menyumbangkan lebih 60 peratus dari keuntungan Petronas Dagangan.

“Sektor inilah yang paling banyak menerima subsidi kerajaan di mana hampir 70 peratus jumlah subsidi yang dibayar dengan menggunakan wang rakyat mengalir kepada syarikat-syarikat luar negara seperti ExxonMobil, Shell dan Caltex.

“Sepatutnya kerajaan yang menguasai Petronas Dagangan mempunyai pandangan strategik dengan menjadi syarikat pertama untuk mengambil alih Esso sekali gus menguasai sektor ini dari 30 peratus kepada hampir 50 peratus,” katanya.

Beliau menambah PAS percaya bahawa masih belum terlambat bagi Petronas Dagangan atau LTAT untuk memulakan perundingan bagi mengambil alih Esso.

“PAS juga mendesak kerajaan supaya menyemak semula penstrukturan subsidi minyak supaya syarikat-syarikat luar negara tidak membolot sebahagian besar jumlah subsidi kerajaan yang berjumlah berbilion-bilion ringgit.

“Kerajaan dan Petronas mestilah bertindak pantas secara strategik supaya kestabilan bekalan bahan petroleum domestik pada paras harga munasabah terus dibina dan dilindungi dan kepentingan negara tidak terhakis,” katanya lagi.

Malah kata beliau, PAS tidak akan bertolak ansur dalam isu strategik dan mempunyai impak jangka panjang kepada keselamatan negara, perkembangan ekonomi dan kepentingan rakyat Malaysia seperti penjualan Esso kepada kepentingan luar.

Government says worst over for North Sea oil spill

The man charged with overseeing the clean-up of the worst oil spill in UK waters for a decade has backed.

The spill happened earlier this month on a Shell pipeline, more than 100 miles off the coast of Aberdeen in Scotland.

Hugh Shaw, who has been appointed by the government to oversee Shell's work has backed claims by oil giant shell that the worst of the spill is behind us.

So far Shell has placed 72 concrete mats on pipeline to secure it to the seabed this work has now secured all of the buoyant sections of pipe, but more mats will be laid over the coming days.

Work has also begun to evaluate the various options for getting rid of the remaining mixture of gas, oil and water in the pipe.

This process will take a number of weeks and will require the approval of the government, through Mr Shaw.

Mr Shaw who is serving as the secretary of state's representative for maritime salvage and intervention, said: "The risk of further oil release has considerably reduced following a successful operation to return raised sections of the pipeline to the seabed with concrete mattresses.

"The latest survey shows a few sections are lying just above the sea floor but operations continue to add additional mats to reduce the risk further.

"A slight sheen was reported in the area yesterday morning and I believe it is inevitable that further sheens will be seen as we move to the dredging and inspection phase of the operation and oil is released from sediment on the sea floor."

Mr Shaw added he will continue to monitor Shell's response and if he deems necessary has powers to order the company to do more.

A spokesman for Shell added: "No oil has been released from the flowline, or release valve, since that point. Continuous monitoring is being carried out to ensure that no releases have occurred."

PETRONAS scores natural gas in two exploration wells off Sabah

PETRONAS Carigali Sdn Bhd reports two natural gas discoveries in shallow water off western Sabah.

The Zuhal East-1 discovery is in the Samarang Asam Paya block about 130 km (81 mi) southwest of Kota Kinabalu in water depth of 38 m (125 ft) and reached a total depth of 2,336 m (7,664 ft). The current estimate of gas-initially-in-place is about 550 bcf. PETRONAS Carigali is the sole equity holder in the block.

The second discovery, the Menggatal-1 well, is in block SB312, about 110 km (68 mi) northeast of Kota Kinabalu. The well is in water depth of 204 m (787 ft) and reached a total depth of 2,100 m (6,890 ft). It was production-tested and flowed gas at a rate of 19 MMcf/d through a 36/64-in choke with no recorded CO2 or H2S content. Gas-initially-in-place is currently estimated to be about 650 bcf.

Block SB312 PSC is a joint-venture between PETRONAS Carigali with 60% equity and KUFPEC Malaysia (SB 312) Ltd, a subsidiary of Kuwait Foreign Petroleum Exploration Co. (KUFPEC).

Further appraisals are being planned in the near future to delineate the extent of these discoveries.

MITI yet to get ExxonMobil's application to sell Esso stake

The Ministry of International Trade and Industry (MITI), has yet to receive an official application from ExxonMobil International Holdings, to dispose of its assets in Esso Malaysia Bhd.

"Going by regulations, there is a need to submit an official application(to dispose of an investment interest in this country), as stated in the
manufacturer's licence," its Minister, Datuk Seri Mustapa Mohamed told reporters at the monthly meeting of the ministry here on Thursday, Aug 25.

"However, to date, we have yet to receive any sort of official application from ExxonMobil," he said.

Last week, Philippine conglomerate, San Miguel Corp announced its plan to acquire a 65% interest in Esso Malaysia and all of ExxonMobil Malaysia Sdn Bhd and ExxonMobil Borneo Sdn Bhd.

Bernama also reported on Wednesday that the Armed Forces Fund Board (LTAT) was keen to acquire the interest in Esso Malaysia, an oil refiner and retailer.

On the contention by certain parties who wanted the interest in the oil company to remain with a local entity, Mustapa said he did not wish to comment
as long as there was no official application from ExxonMobil.

"We are following developments on this matter, and will for sure, consider the interest of all concerned," he added. - Bernama

RM15bil Gas project to benefit TNB

The RM15bil gas exploration project in the North Malay Basin, to be undertaken by Petroliam Nasional Bhd (Petronas) and its production-sharing contract (PSC) partners, will benefit a number oil and gas companies as well as utility giant Tenaga Nasional Bhd (TNB).

Analysts said the project would provide a boost to the oil and gas industry as contracts would be dished out for the commissioning of the new project as well as the increase in gas volume for Petronas' customers.

A key customer is TNB, which has been facing prolonged gas shortage for months and is currently getting 30% less than it is supposed to. TNB said the gas curtailment exercise by Petronas had severely impacted its bottom line, prompting the company to issue a warning on its profitability and dividend payment.

On average, TNB was getting about 900 million standard cu ft per day (mmscfd), far from the usual rate of 1,250 mmscfd.

“It will be good for the industry. It means there will be more assurance of gas supply in the country. The project will give assurance of supply in the longer term. But this will not solve the immediate gas shortage problem in the country,” said OSK Research head Chris Eng.

A local bank-backed analyst said although the project would not solve the immediate gas shortage problem as the first gas was expected in 2013, the project was nevertheless a boost for Petronas customers.

“It remains to be seen how much gas will TNB get in the future, given the increase in gas capacity when the North Malay Basin project comes on stream,” he said.

Based on TNB's current gas power generation capacity, the volume needed is about 1,700 mmcfd. The power sector is entitled to about 1,350 mmscfd.

CIMB Research said the new project was a “positive development” for Petronas Gas Bhd, which would benefit from additional transport and processing revenues from 2013, when the first gas was expected.

The research house said Wah Seong Corp Bhd could also benefit from pipe-coating works.

OSK Research believes the first to benefit among the oil and gas support services providers would include fabricators (such as Kencana Petroleum Bhd and Malaysia Marine and Heavy Engineering Bhd), pipe layers (SapuraCrest Petroleum Bhd) and centralised tankage facilities operator Dialog Group Bhd.

The research house said there should be flow-through to vessel players like Perdana Petroleum Bhd, Alam Maritim Resources Bhd and Tanjung Offshore Bhd to transport the fabricated structures to the offshore platforms.

Subsequently, the hook-up and commissioning as well as brownfield service providers like Dayang Enterprise Holdings Bhd, Petra Energy Bhd and even Kencana may benefit from the initial set-up and maintenance activities on the platforms. KNM Group Bhd may also get some jobs for its process equipment segment even though the bulk of its sales are from outside Malaysia.

OSK Research analyst Jason Yap said the main objective of the project was to “help sustain the supply of gas” to Petronas customers in Peninsular Malaysia.

“And, in doing so, Petronas would be able to benefit from the recently introduced incentives by the Government, particularly for the development of marginal fields, high carbon dioxide gas fields and fields located in high-pressure, high-temperature conditions.

“Also, with the gradual revision of gas prices to domestic customers by the Government, this helps to make the project more economically feasible for Petronas and its PSC contractors,” Yap said.

On Tuesday, Petronas said it was embarking on the North Malay Basin upstream project to extract gas from fields off Peninsular Malaysia.

Petronas said the project comprised nine discovered gas fields within Blocks PM301 and PM302 and in the Bergading contract area, about 300km off the peninsula's coast.

“It will also involve the development of a new 200km pipeline to transport gas from the fields to Kertih, Terengganu. The project is estimated to cost RM15bil.

“Petronas and its PSC partners are undertaking the project on an accelerated basis. First delivery of 100 million mmscfd is expected by early 2013, ramping up to 250 mmscfd by 2015,” it said.

Petronas, partners in RM15bil gas project

Petronas and its production sharing contract (PSC) partners are embarking on a RM15bil upstream project to extract gas from fields off Peninsular Malaysia, which also includes a new 200km pipeline. The company describes the fields as “marginal and challenging”.

Petronas said the project comprised nine discovered gas fields within Blocks PM301 and PM302 and in the Bergading contract area, about 300km off the coast of the peninsula.

“It will also involve the development of a new 200km pipeline to transport gas from the fields to Kertih, Terengganu. The project is estimated to cost RM15bil,” it said.

“Petronas and its PSC partners are undertaking the project on an accelerated basis. First delivery of 100 million standard cu ft of gas per day (mmscfd) is expected by early 2013, ramping up to 250 mmscfd by 2015,” the national oil company added.

Called the North Malay Basin project, it is one of the new initiatives by Petronas and its partners to extract and evacuate gas with high carbon dioxide content to meet gas demand in Peninsular Malaysia.

Petronas said the development of the project followed the recently introduced incentives by the Government, particularly to develop marginal fields, high carbon dioxide gas fields and fields located in high-pressure, high-temperature conditions.

“The gradual revision of gas prices to domestic customers, as recently announced by the Government, also makes the project more economically feasible for industry players,” it added.

Petronas said it expected the additional volume of gas from the North Malay Basin project to help sustain supply to its customers in Peninsular Malaysia.

“The project, which entails numerous upstream commitments, is expected to encourage more investments by industry players and spur exploration activities that could lead to sizeable discoveries offshore Peninsular Malaysia,” it said.

Ramai menunggu penjelasan penjualan ExxonMobil

PERSETUJUAN ExxonMobil untuk menyerahkan syarikat itu kepada San Miguel Corporation (SMC) terus dikecam oleh banyak pihak yang melahirkan rasa tidak puas hati dengan transaksi itu meskipun keputusan tersebut telah dibuat seminggu lalu.

Ia kerana terlampau banyak persoalan dan pertikaian yang boleh dibangkitkan daripada keputusan penjualan kepentingan ExxonMobil kepada SMC.

ExxonMobil perlu menjawab persoalan mengapa memilih SMC sedangkan harga yang ditawarkan begitu murah jika benar Boustead Holdings Bhd. membuat tawaran keseluruhan sebanyak RM1 bilion.

Di manakah rasionalnya keputusan ExxonMobil itu sekiranya hak pemegang saham minoriti dinafikan?.

Malah, selaku agensi yang terlibat dalam pelaburan langsung asing, mengapakah Kementerian Perdagangan Antarabangsa dan Industri (MITI) dan Suruhanjaya Sekuriti (SC) meluluskan urus niaga tersebut?

Mengapakah syarikat luar didahulukan sedangkan sektor minyak dan gas adalah keutamaan Malaysia?

Sejak isu jual beli ini disiarkan, nampaknya tiada satu pihak pun, baik ExxonMobil mahupun MITI tampil untuk membuat kenyataan, sekali gus menyebabkan isu ini menjadi polemik di kalangan ahli politik, pertubuhan bukan kerajaan (NGO) dan industri.

Justeru, banyak pihak mengesyorkan supaya kerajaan segera campur tangan dalam urus niaga itu kerana tindakan sedemikian adalah dibolehkan.

Biarpun urus niaga itu dilakukan ketika ExxonMobil dan SMC dalam keadaan bersedia untuk menjual dan membeli namun tidak menjadi kesalahan sekiranya campur tangan itu dilaksanakan demi kepentingan hak pemegang saham minoriti dan melindungi kepentingan nasional.

Seorang penganalisis ekonomi yang enggan namanya disebut berkata, tidak menjadi kesalahan untuk kerajaan campur tangan apabila urus niaga itu mengenepikan kepentingan nasional.

''ExxonMobil memang sebuah syarikat asing tetapi kita jangan lupa operasinya di Malaysia menggunakan aset-aset dan kemudahan strategik negara.

''Terlalu banyak persoalan yang boleh menyebabkan ketelusan dalam proses jual beli ini dipertikaikan.

''Penjualan kepada SMC seolah-olah berlaku sabotaj dalam ekonomi dan situasi urus niaga cenderung kepada keadaan mencurigakan,'' katanya kepada Utusan Malaysia di sini.

Malah, beliau turut mempersoalkan adakah MITI dan SC melihat urus niaga tersebut dalam perspektif nasional sebelum membuat sebarang kelulusan.

Sementara itu, Ketua Ekonomi Bank Islam (M) Bhd., Azrul Azwa Ahmad Tajuddin juga bersetuju sekiranya kerajaan menarik balik kelulusan yang telah diberikan kepada SMC.

Tegas beliau, penarikan itu wajar dilakukan kerana harga yang ditawarkan begitu rendah sebanyak 29 peratus daripada harga pasaran.

Justeru, beliau berkata, sewajarnya Badan Pengawas Pemegang Saham Minoriti Bhd. (MSWG) segera meneliti dan membuat kajian terperinci.

Seorang pemerhati ekonomi berkata, kerajaan boleh campur tangan sekiranya ia mahu, apatah lagi isu ini semakin hangat diperkatakan.

''Urus niaga ini belum selesai, masih banyak cara untuk menariknya balik,'' katanya.

Bagaimanapun, beliau tidak menafikan sekiranya campur tangan itu berlaku, ia akan menimbulkan perkara lain termasuk isu pampasan.

Mendengar hujah-hujah yang dilemparkan, isu penjualan Exxonmobil kepada SMC akan terus menjadi hangat kerana terlalu banyak pertikaian yang perlu dijawab.

Sektor minyak dan gas adalah nadi dan tonggak kepada ekonomi Malaysia.

Lebih utama, sanggupkah kakitangan Exxonmobil yang sedia ada bekerja di bawah syarikat minuman keras?

Sama ada kerajaan mahu atau tidak campur tangan dalam isu ini, itu adalah pilihannya tetapi seperti kata banyak pihak tidak ada salahnya untuk berbuat demikian atas alasan mendahulukan kepentingan nasional, melindungi hak pemegang saham minoriti yang terdiri di kalangan rakyat Malaysia dan kelangsungan kakitangan Exxonmobil.

Iraq awards $471.7 mln contract to Saipem

Iraq has awarded a $471.7 million contract for an oil export facility expansion and sub-sea pipeline to Italian group Saipem , Iraqi oil sources told Reuters on Wednesday.

Saipem will build a single point mooring buoy (SPM) with an export capacity of 900,000 barrels per day and construct a 50-kilometre pipeline to transport crude from storage depots in Iraq's southern Faw peninsula to the new floating terminal, according to the sources and to documents obtained by Reuters.

Saipem should complete engineering, procurements and construction work within 24 months. The order is the second phase in a wider expansion project announced last year..

Tender documents show that three other companies submitted bids for the contract, including Leighton Offshore Private Ltd, National Petroleum Construction Co. (NPCC) and J. Ray McDermott, a part of U.S.-based engineering and construction company McDermott International Inc. .

The whole expansion project, for which Foster Wheeler AG is handling the project management consultancy services, involves building two marine pipelines and one onshore pipeline and installing four single point moorings for loading oil tankers at a total cost of about $1.3 billion.

In the first stage, Australian construction contractor Leighton Holdings last year had signed a $733 million contract with Iraq's South Oil Company to install moorings and pipelines in the Gulf, off Iraq's coast.

Iraq has awarded a series of massive oilfield development contracts to majors such as Shell and BP with the ambitious target of expanding its oil production capacity to 12 million bpd by 2017. Most analysts see 6-7 million bpd is more realistic.

Current export infrastructure is out-dated and lacks the capacity to handle Iraq's future expected output raise. Iraq is currently exporting an average of 2.2 million barrels per day and expects to export 2.5 mln bpd in 2012.

After completing the export facility expansion project, Iraq would start renovating two existing oil terminals in south Basra with a plan to build a strategic pipeline from the southern Basra fields through Syria and Turkey.

Dialog bags oil field job from Petronas

Oil and gas service provider Dialog Group Bhd, Roc Oil Malaysia (Holdings) Sdn Bhd and Petronas Carigali Sdn Bhd have bagged a 15-year small field risk service contract (SFRSC) from Petroliam Nasional Bhd for the development and production of petroleum from the Balai Cluster Fields, Sarawak estimated to cost up to US$950mil (RM2.8bil).

“We are excited about the prospects of this project...being only the third local company to have been awarded a risk service contract (RSC) after Kencana Petroleum Bhd and SapuraCrest Petroleum Bhd,” Dialog Group Bhd executive chairman Ngau Boon Keat told Starbiz yesterday.

The contractor group will be 32% owned by Dialog's unit Dialog D&P Sdn Bhd while ROC Oil Malaysia, which is part of the Australian Roc Oil group, and Petronas Carigali will own 48% and 20% interests respectively in the group which will form a joint venture company to manage the SFRSC .

The joint venture company will carry out the management, operations and development of the SFRSC including the funding for the cost of development and production of the fields, Dialog said.

Dialog said it would fund its portion of its working capital for the project from its internally generated funds, bank borrowings and/or proceeds from equity/debt fund raising exercises.

“The breakdown of the funding is pending finalisation,” it said, adding that the board was mindful to maintain a healthy gearing level.

Shares in Dialog were suspended in yesterday's afternoon trading session pending the announcement. It was last traded at RM2.67 6 sen or 2.3% up from the previous day's close.

Dialog said the development and production of the petroleum located offshore Bintulu, Sarawak would be carried out in two phases - the pre-development phase, estimated to cost between US$200mil and US$250mil and which is scheduled to commence this year, taking up to 18 months to complete, as well as the development phase estimated to cost between US$650mil and US$700mil.

The group will submit a field development plan for all or some of the fields on the successful completion of the pre-development phase and agreement on the economic viability of the fields.

Production from all the fields in the cluster was planned to be online within 24 months from commencement of the development programme, Dialog said adding that development activities were planned to include the drilling of wells, the installation of platforms and topsides and pipelines.

Industry sources said the potential return on marginal oil field development for the contractors could be as high as 15%, in line with returns seen for upstream works.

In its announcement to Bursa Malaysia, Dialog said the contract was expected to contribute positively to the group's future earnings.

In January this year, a consortium formed by Kencana, SapuraCrest and Petrofac Energy Developments Sdn Bhd which is part of the London-listed Petrofac Ltd were awarded the country's first RSC.

The RSC is a new contract implemented for the development and production of local marginal oilfields.

Keppel to deliver ultra deepwater rig to Saipem

Keppel FELS says it is on track to deliver Scarabeo 9, a sixth-generation ultra-deepwater semisubmersible drilling rig, to Saipem on time and with no lost time incidents.

The company says that a significant part of its workscope on the rig involved the completion and commissioning of marine and drilling systems onboard. The Frigstad D90 semisubmersible rig is equipped with a Dynamic Positioning 3 system and will be capable of operating in water depths of up to 3,600 meters (11,810 ft).

Keppel’s current projects for Saipem include the completion of a newbuild pipe laying vessel, Castorone, which is being jointly undertaken by Keppel Shipyard and Keppel Singmarine.

Saipem has also previously sent the Saipem 7000, a semisubmersible crane and pipelaying vessel, for drydocking at the Keppel Verolme shipyard in the Netherlands in 2007. More recently, Keppel Verolme completed the repair and modification of the semisubmersible pipelay vessel, Castoro Sei.

Shell 2Q net loss narrows to RM27.7m

Shell Refining Company (Federation of Malaya) Bhd posted net loss RM27.71 million in the second quarter ended June 30, 2011 compared to net loss RM46.78 million a year earlier, due to weak refining margins and lower production as a result of the major statutory turnaround.

It said on Wednesday, Aug 10 that revenue for the quarter fell to RM1.62 billion from RM2.71 billion a year earlier. Loss per share was 9.24 sen while net assets per share was RM7.12.

Shell declared a gross interim dividend of 20 sen per share.

For the six months ended June 30, Shell’s net profit surged to RM107.83 million from RM11.83 million on the back of revenue RM4.82 billion.

Reviewing its performance, Shell said that in the second quarter of 2011, the refinery processed 12.4 million barrels of crude oil and sold 13.4 million barrels of product.

On its prospects, Shell said refining margins were expected to be under pressure in Q3 2011 due to growing concerns over oil prices and crude oil availability.

“The company continues to take every opportunity to optimise margins.

“In 2011, the company has commenced CONSTRUCTION [] of the new 6,000 tonnes per day diesel processing unit in the refinery. The RM810 million investment will allow the company to vary feedstock options and improve refining margins,” it said.

Petronas Dagangan posts RM208.73m net profit, declares 15c dividend

PETRONAS DAGANGAN BHD posted net profit RM208.73 million on the back of revenue RM7.54 billion for the three months ended June 30, 2011.

Earnings per share was 21 sen while net assets per share was RM5.04.

The company declared a gross interim dividend of 15 sen per share for the three months ended June 30, totaling RM111.76 million, payable on Sept 22.

The company had on March 2 this year announced the change of its financial year end from March 31 to Dec 31 beginning from April 2011, resulting in no equivalent comparative quarters.

Commenting on its prospects, Petronas Dagangan said on Wednesday, Aug 10 that market demand conditions remain challenging due to the slowdown in economic growth and rising inflation rates.

However market leadership will continue to be maintained with continuous strategic marketing efforts and initiatives, it said.

The company said efforts to improve margin would continue through cost optimisation and operational efficiency initiatives.

“Profits for the current year will be lower due to the 9-month financial period arising from the change in financial year end to 31 December beginning from April 2011.

“The profits may be impacted by fluctuations in international oil price, petroleum product costing and global economy,” it said.

Saipem to lay Niger Delta gas line

Shell Petroleum Development has contracted Saipem to install the Otumara-Saghara-Escravos gas pipeline in Nigeria.

The 42-km (26-mi) long pipeline, in diameters ranging from 2-12-in. (5-30-cm), will pass through a swampy terrain with a major river crossing.

It will transport around 30MMcf/d of processed associated gas from the Otumara and Saghara fields in the western Niger Delta.

This will be sent through the Escravos-Lagos system to the domestic market, helping to reduce flaring, or the burning of gas produced with oil.

The project should be completed within 18 months.

BPMigas Seeks to Hike PGN Gas Price by 200%

After negotiating a higher natural gas price with Malaysia’s Petronas Carigali, upstream oil and gas regulator BPMigas now wants to triple the rate paid by Indonesia’s state gas distributor.

BPMigas has been working to renegotiate prices with customers to boost revenue as prices for natural gas climb. It has been in talks with a number of consumers, including state-controlled Perusahaan Gas Negara.

PGN buys natural gas at an average price of $1.8 per million British thermal units (mmbtu), but Raden Priyono, BPMigas’s chairman, said on Tuesday that it wanted to raise the rate to $5.5 per mmbtu.

Sri Budi Mayaningsih, corporate secretary at PGN, which is controlled by the State Enterprises Ministry, declined to comment on the negotiations. The contract was signed in the 1990s, according to BPMigas data.

“The upstream companies are not happy with the current price,” and as a regulator, BPMigas is obliged to mediate renegotiations, Priyono said.

Upstream producers in the country include ConocoPhillips, Total E&P Indonesie and state-run Pertamina.

Last month, BPMigas and Petronas Carigali, a subsidiary of Malaysia’s state-owned energy giant, Petronas, agreed to a new rate at close to $6 per mmbtu. That is more than double the previous $2.8 per mmbtu.

Rates for exports are higher than those charged Indonesian utilities and companies.

Pri Agung Rakhmanto, an energy analyst from the Reforminer Institute, said last month’s successful price renegotiation should be used as a starting point for any future renegotiations with other companies.

“It shows that we have the power to set the gas price, so we are not to be underestimated,” he said. “I am happy to hear about this. This is good progress for our country.”

BPMigas also plans to discuss raising the rate in a contract with China National Offshore Oil Corp., which purchases liquefied natural gas from the Tangguh plant in Papua.

The Tangguh contract was signed in 2002 during President Megawati Sukarnoputri’s administration. It set the price at $2.40 per mmbtu for 25 years.

Priyono said that should the renegotiation with PGN prove successful, BPMigas would likely start talks with CNOOC on the Tangguh contract.

“The price [for PGN] will have an impact on the Tangguh LNG renegotiation,” he said. “If the domestic price has been settled, it will be easier to change the price on Tangguh.”

A team was formed in 2008 to renegotiate the Tangguh gas deal but so far no progress has been made. - Jakarta Post

Progress signs $1B LNG deal

Rigs to begin drilling in B.C. in Q4

A feasibility study into building a West Coast liquefied natural gas export facility will begin in September after a $1.07-billion partnership deal was signed early Tuesday by Calgary-based Progress Energy Resources Corp. and the Malaysian national oil company, Petronas.

Meanwhile, rigs will be con-tracted to begin drilling in the fourth quarter on the 60,000 hectares of B.C. covered by the joint venture deal.

Progress president and chief executive Mike Culbert said the final agreement was signed at 2 a.m. Tuesday after a marathon negotiating session in Calgary over the long weekend.

"It was a long weekend but very rewarding and obviously something we're very excited about at Progress," he said.

In the end, he said, the deal closely followed the framework agreement set in June in envisioning a 50-50 partnership on Progress's North Montney play, which has proved and probable reserves of 600 billion cubic feet, with the production to be dedicated to an LNG export terminal.

"We got our $267.5 million this morning for the down payment and now we'll get busy getting the rigs going in the fourth quarter and away we go," said Culbert, adding the negotiators were planning to play golf Tuesday afternoon to celebrate.

In June, Calgary-based Encana Corp. reported that a similar $5.4-billion shale gas joint venture with PetroChina had fallen apart because the parties could not agree on details in a final deal.

Analyst Kristopher Zack of Raymond James, who covers Progress, said the fate of the PetroChina joint venture probably weighed on the market but the two are "apples and oranges."

Progress shares closed at $13.82, down four cents, on Tuesday. The stock rose to $14.84 a few days after the joint venture was announced in June but have fallen since, in spite of 12 of 16 analysts in a Bloomberg survey rating it a buy with a target price of $17.43.

"I think it's a very good deal that hasn't necessarily been reflected in the market," Zack said. "I think what needs to happen is they to articulate what their revised growth objectives are going to look like for 2012 and I think you'll see that in the fall."

The LNG terminal study is expected to take about a year and a decision will be made then on whether to proceed, Culbert said.

Petronas, which has extensive LNG facilities around the world, will control the LNG company with 80 per cent ownership.

The partnership is proposing two trains each with capacity of 3.7 million tonnes per year of LNG or 600,000 cubic feet of gas per day to be built one after the other.

That's smaller than the Kitimat LNG proposal for two five million-tonne-per-year trains, the first phase of which is to cost $4.2 billion, including a related pipeline.

Kitimat LNG, owned by Encana and Houston-based partners Apache Corp. and EOG Resources Inc., is awaiting a National Energy Board decision on a 20-year export licence, for which a hearing was held earlier this year.

Culbert said he expects opposition to the terminal and the pipeline that will need to be built to get the gas to the coast.

"I think that's always the challenging part, the stakeholder relations, but there's no doubt natural gas has not the same degree of opposition as a crude oil line has," he said.

"The Kitimat project is a couple of years ahead of us, so it's forging a path down the pipeline right of way . . . We think it's a necessity for Canada - we have a very large resource and we need to diversify our markets. It will be a lot of work getting there but we think it will happen in time."

The partnership is estimating five to eight years to get approvals and build the LNG terminal.

The deal allows Petronas to share in the costs and rewards of developing Montney shale assets in the foothills of northeast British Columbia, on properties called Altares, Lily and Kahta.

Petronas was founded in 1974 and has invested in more than 30 countries.

SapuraCrest wins new jobs in Australia

SapuraCrest Petroleum Bhd’s flagship vessel Sapura 3000 has won jobs worth up to US$260 million (RM769.6 million) for the Gorgon natural gas project offshore Western Australia.

Sapura 3000 is expected to grab about 60% of the US$440 million offshore operation contract from Norway-based Subsea 7 SA, a joint-owner of the vessel, a source said. The 60% share will come up to some US$260 million from Subsea 7’s contract.

Subsea 7 has just been awarded a US$440 million contract by Chevron Australia Pty Ltd for the Gorgon natural gas project, according to its statement to the Oslo Stock Exchange last Friday. Operated by Chevron, the Gorgon project is one of the world’s largest natural gas projects and is a joint venture between Chevron’s Australian subsidiaries and ExxonMobil Corp.

In the announcement, Subsea 7 said it would be using Sapura 3000 plus other construction vessels from its fleet for the offshore operations that would start in 2013.

Being the co-owner of the Sapura 3000 vessel, the contract sum would be a significant boost for SapuraCrest, analysts say.

“That (the new job) will probably bring in close to RM400 million revenue to SapuraCrest,” a source said.

Subsea 7 became the co-owner of Sapura 3000 in January after the Oslo-listed oil service firm merged with Acergy SA.

In its latest annual report, Sapura Crest said its vessel Sapura 3000 has built up a track record in the participation in deepwater oil and gas activities.

The projects that Sapura 3000 has taken part in are the Gumusut-Kakap field that is operated by Sabah Shell Petroleum Co Ltd, the Iwaki Platform decommissioning project offshore Japan and the Devil Creek development project near Australia water.

“The Sapura 3000 will be visiting Australian waters again to commence work pursuant to the award of PTTEP Australasia (Ashmore Cartier) Pty Ltd contract worth RM482 million for the provision of offshore transport and construction for its Montara development project,” said the company’s latest annual report.

Currently, SapuraCrest has equity interest in three pipe-laying barges — 50% in the Sapura 3000; 40% in LTS 3000 — partnering India’s Larsen & Tourbro Ltd and 26% in QP 2000, partnering Quippo Prakash Pte Ltd.

For 1QFY12 ended June 30, SapuraCrest posted a net profit of RM72.3 million or 5.67 sen per share, up 43% from RM50.7 million or 3.97 sen per share in the previous corresponding period. Revenue, however, was lower at RM550.8 million against RM670.3 million previously.

The company made a net profit of RM374.5 million for FY11 ended April 30 compared with RM335.2 million for FY10. Revenue was marginally lower at RM3.17 billion compared with RM3.25 billion.

SapuraCrest made headlines recently with its merger with Kencana Petroleum Bhd, a move that will create the largest non-government-linked oil and gas counter on Bursa Malaysia. The merged entity is expected to have a market capitalisation of RM11 billion. With assets worth a whopping RM6 billion, the merged entity will also be the fourth largest oil and gas service provider in the world.

Oil price falls to lowest level in 6 months

Oil prices extended sharp losses to near $86 a barrel Friday in Asia amid expectations a slowing global economy will weaken demand for crude.

Benchmark oil for September delivery was down 39 cents to $86.24 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. Crude tumbled $5.30 to settle at $86.63 on Thursday.

In London, Brent crude was up 25 cents at $107.50 per barrel on the ICE Futures exchange.

Oil and other commodities were dragged down by a plunge in global stock markets as traders lost confidence in U.S. economic growth. The Dow Jones industrial average sank 4.3 percent Thursday and stock markets in Asia opened sharply lower Friday.

Investors fled to lower-risk assets, such as the U.S. dollar, which exacerbated oil's decline. Crude usually falls when the dollar gains since a stronger U.S. currency makes commodities more expensive for investors with other currencies.

All eyes will be on Friday's July jobs report for evidence about the strength of the U.S. economy. Economists expect that 90,000 jobs were created in the U.S. last month, which is not enough to lower the unemployment rate, currently at 9.2 percent.

"Economic worries in the U.S. led to fears that oil demand will soften dramatically," energy consultant Cameron Hanover said in a report. "If Friday's jobs number is surprisingly robust or bullish, we could see assets of every stripe rally."

Some analysts point to growing crude consumption and robust economic growth in emerging markets to suggest supply and demand fundamentals don't justify the drop in oil prices from $100 two weeks ago.

"Commodity market participants are running the risk of being fooled by the gloomy macroeconomic environment and overlooking the bigger picture of a market that remains fundamentally well supported," Barclays Capital said in a report.

The drop in crude - oil is down from near $115 in May - should also lower costs for products such as gasoline and help free up some consumer purchasing power.

In other Nymex trading in September contracts, heating oil rose 1.2 cents to $2.91 a gallon while gasoline gained 1.0 cent at $2.74 a gallon. Natural gas futures slid 0.3 cent at $3.94 per 1,000 cubic feet. - AP

Earlier report

NEW YORK: Oil posted its biggest one-day drop in three months as investors worried about another recession.

Crude prices tumbled nearly 6 percent Thursday, outpacing a broad sell-off on Wall Street, where major indexes were down more than 4 percent.

Benchmark West Texas Intermediate crude for September delivery fell $5.30, or 5.8 percent, to settle at $86.63 per barrel on the New York Mercantile Exchange. That's the steepest drop since oil took an 8.7 percent tumble on May 5. Oil dropped as low as $86.04 per barrel earlier in the day, its lowest level since February.

Brent crude, used to price many international oil varieties, lost $5.98, or 5.3 percent, to settle at $107.25 per barrel on the ICE Futures exchange in London.

This should be good news for U.S. motorists. If oil holds at these lower levels, the drop could be felt within days at gas pumps across America. Fred Rozell, retail pricing director at Oil Price Information Service, said the recent slide in oil could cut between 20 to 35 cents from a gallon of regular over the next month. The national average is currently $3.703 per gallon (3.8 liters).

"You could see some sizable declines at the pump," Rozell said.

Earlier in the summer, investors were still holding on to the notion that fuel prices would rise as economies in the U.S. and Europe recovered from the Great Recession. Even a pullback in U.S. gasoline consumption couldn't push oil back from around $100 per barrel.

A string of disappointing reports on manufacturing and economic growth during the past week, combined with lawmakers squabbling over spending and debt in the U.S. and Europe, has everyone in the mood to sell oil, Rozell said.

Oil has declined for seven straight trading days. It's down 13 percent since July 26. Prices dropped as the government reported sluggish, 1.3 percent GDP growth in the second quarter, and reports said that manufacturing activity was cooling off in the U.S. and China.

On Thursday a rising dollar also helped pull oil lower. Oil, which is priced in dollars, tends to fall as the dollar rises and makes crude more expensive for investors holding foreign money.

"We've come down so far, so fast, that it seems investors are just looking for an excuse to sell," independent analyst Jim Ritterbusch said.

The dollar rose Thursday after Japan and Switzerland moved to weaken their currencies. The yen and Swiss franc surged recently as investors worried about slowing economies in Europe and the U.S., and sought so-called "safe haven" currencies. As the currencies of those countries strengthened, their goods became more expensive in overseas markets. Switzerland's central bank took steps Wednesday to curb the value of the franc, while the Japanese did the same for the yen on Thursday.

Energy prices fell across the board on Thursday. The Energy Department's Energy Information Administration said in its weekly report that natural gas held in underground storage grew by 44 billion cubic feet. Analysts had expected an increase of between 34 billion and 38 billion cubic feet. Natural gas plunged after the report, losing nearly 15 cents to settle at $3.941 per 1,000 cubic feet.

In other Nymex trading for September contracts, heating oil fell 12.5 cents to settle at $2.8939 per gallon and gasoline futures gave up 19.41 cents to settle at $2.7372 per gallon. - AP

Scepticism hits oil and gas mega projects

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).

Gazprom Neft, Petronas Sign PSA with Cuba on 4 Offshore Blocks

Gazprom Neft, which is controlled by state gas company Gazprom, said Monday it has signed a product-sharing contract on four blocks in the Gulf of Mexico offshore Cuba with Petronas, the Malaysian national oil company, and Cubapetroleo, the Cuban national oil company.

Following the signing, Gazprom Neft becomes a party in the contract and acquires 30% stake in the project, while Petronas retains 70% in the project. Prior to the agreement Petronas had a 100% stake in the project.

In October 2010, Gazprom Neft and Petronas signed the Farm-out Agreement

"This partnership with Petronas will help Gazprom Neft to enforce its competence in the sphere of deep water development and expand its expertise in projects outside of Russia," Alexander Dyukov, chairman of Gazprom Neft management board said.

Apart from Cuba, Gazprom Neft participates in international exploration and production projects in Iraq, Equatorial Guinea, Venezuela and--through its Serbian affiliate company--in Angola, Romania and Hungary.

Petronas: Sinopec-led consortium not involved in project

Petronas has clarified that the Sinopec-led consortium has not taken part in any of its prior processes in the development of marginal offshore oilfields in Malaysia.

There have been several recent reports that the China Petrochemical Corp (Sinopec) has formed a consortium with Sabio Oil and Gas Sdn Bhd (SOG), a unit of Sabio Technology Bhd, and International Oil Design and Construction Sdn Bhd (IODC), a unit of ODCC Group of Iran, to undertake the development of a Petronas marginal oilfield located off the coast of Terengganu.

According to a Bernama report, Sinopec will hold 40% in the consortium while SOG and IODC will each hold a 30% stake.

“While Petronas is extremely encouraged with the interest shown by various local and international industry players in the country’s marginal fields, the Sinopec-Sabio-IODC consortium has not taken part in any of our prior processes.

“In addition, as part of our selection criteria, any local company to be selected by foreign partners to participate in the risk service contract (RSC) petroleum arrangement is required to have a proven track record as an established oil and gas service provider, apart from being a listed entity,” Petronas said in a statement yesterday.

Sabio Technology has reportedly received the nod for a listing on Bursa Malaysia and is expected to release its prospectus soon.

Little is known about Sabio Technology’s business but research shows that it is an electronic contract manufacturing services provider and is in PVC manufacturing.

SOG executive chairman Datuk Seri Ahmad Sukimi Ibrahim is the president and managing director of Sukimi Group, an integrated petroleum corp.

According to its website, Sukimi Group is involved in the exploration and production of oil and gas, oil refining, marketing and distribution of petroleum products, trading, gas processing and liquefaction, gas transmission pipeline operation, marketing of liquefied natural gas, petrol chemical manufacturing and marketing, logistics and maritime and property investment.

Petronas has awarded only one RSC so far to a consortium that consists of Kencana Petroleum Bhd, SapuraCrest Petroleum Bhd and Petrofac Energy Development Sdn Bhd to develop the Berantai field, off the coast of Terengganu.

“Petronas is developing in phases a number of marginal offshore fields in Malaysia under a new RSC petroleum arrangement. We had already completed a data review process with parties interested in the fields identified for the first phase of the development and have so far awarded a RSC for the Berantai field to the Petrofac-Kencana-Sapura partnership,” Petronas said.

Petronas Carigali makes two significant gas discoveries

Petronas Carigali Sdn Bhd, the exploration and production arm of Petronas, has made two significant gas discoveries in the shallow water areas offshore the west coast of Sabah.

The first discovery was via the Zuhal East-1 well, which was located in the Samarang Asam Paya Block about 130km southwest of Kota Kinabalu. The well was spudded in water depth of 38 m and reached a total depth of 2,336 m to confirm the presence of significant gas-bearing reservoirs.

The current estimate of gas-initially-in-place is about 550 billion standard cubic feet (bscf).

Petronas, in a statement yesterday, said similar reservoirs in a nearby well about 5 km to the east of the Zuhal East discovery were tested to flow gas at a maximum rate of 21 million standard cubic feet per day (mmscfd). Petronas Carigali is the sole equity holder of the production sharing contract (PSC) of the Samarang Asam Paya Block.

The second discovery, at the Menggatal-1 well, is located in Block SB312, about 110 km northeast of Kota Kinabalu. The well was spudded in water depth of 204 m and reached a total depth of 2,100 m.

It was production-tested and flowed gas at a rate of 19 mmscfd through a 36/64-inch choke size with no recorded CO2 and H2S content. Gas-initially-in-place is currently estimated to be about 650 bscf.

Commenting on the gas discoveries, TA Securities Holdings Bhd research head Kaladher Govindan told StarBiz the discoveries would not immediately address the current shortage of gas as it would normally take four to five years for the supply to come on stream.

Furthermore, he added the new Petronas Gas Bhd's LNG regas plant in Malacca, which is expected to be commissioned next year, would help to an extent address the gas shortage supply.

Another analyst said the discoveries would be upon coming on stream be catered for the local market for gas in view of its shortage but the new regas plant would help “cushion out” the supply situation.

Block SB312 PSC is a joint-venture between Petronas Carigali with 60% equity and KUFPEC Malaysia (SB 312) Ltd, a subsidiary of Kuwait Foreign Petroleum Exploration Company, which holds the remaining interest. Petronas Carigali is the operator for both PSCs.

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