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.

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.

‘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.

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.

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.

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

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

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.