Demand From China, India And Asia Pacific To Continue For Petronas Chemical Group products

Petronas Chemicals Group Bhd (PCG), the leading integrated petrochemicals producer in Malaysia, is expected to see continued demand for its products from China, India and the Asia Pacific.

PCG produces a diversified range of petrochemical products from its olefins and derivatives segment as well as fertilisers and methanol.

In a research note today, OSK Research said PCG's utilisation rate for both segments stood at 86 per cent and 82 per cent respectively, for the fourth quarter of financial year 2011.

Thus, it added, the PCG management is targeting for the utilisation rate of its plants to hit 90 per cent.

OSK said in addition, PCG also expects the feasibility study on its Refinery and Petrochemical Integrated Development Project to be completed by year-end.

The research house has maintained a "buy" call on PCG's stocks at RM9.28. -- Bernama

Government expects 40pc of total investment from oil and gas

The government has projected the oil and gas sector to continue supplying over 40 per cent of total investments until 2020.

Minister of International Trade and Industry Datuk Seri Mustapa Mohamed said today that the sector is projected to invest at least two-fifths of the RM1.33 trillion targeted under the Economic Transformation Programme (ETP).

“Oil and gas has been contributing about 42 per cent each year, so it is on track,” he told reporters.

The ETP, launched by Prime Minister Datuk Seri Najib Razak in September 2010, plans to push the country to reach developed nation status by 2020.

This will include raising per capita income from US$6,700 (RM20,400) per year to US$15,000 and total gross national income to US$523 billion.

Putrajaya has set an annual target of six per cent economic growth to achieve this target.

Mustapa also said today that total investment for 2011 was RM83 billion, with an average of RM115 billion per year targeted for the next five years.

Gulf Petroleum signs deals for RM17b hub

Qatar-based Gulf Petroleum (M) Sdn Bhd (GPLM) has signed agreements with consortium groups from China, Hong Kong and India to jointly develop its RM17 billion integrated oil and gas complex in Port Dickson.

Marmagoa Steel Ltd and Rukmani Finance Pte Ltd, which are led by India-based businessman Ashok Mittal, have formed a consortium with a local partner - Extrarich Marine Sdn Bhd.

Together, this consortium will undertake the financing, construction and supply of steel to build storage facility at the complex.

China-based telecom solutions provider Huawei Technologies has also come onboard to participate in the development of the complex. The group will cover the information technology and telecommunication aspects of the plant.

Meanwhile, Hong Kong-based Oriental Air Energy Investment Corp Ltd will undertake the financing and construction of the power supply requirements of the complex by utilising patented green air-powered technology.

GPLM managing director Nor Azmi Abdullah said the group has received official proposals from 35 countries worldwide interested to participate in the setting up of the complex. They include banking groups, government-linked investment companies and oil and gas companies.

"We will have more partnerships like the ones signed today. We are carefully studying the proposals at this stage," he said during a media briefing yesterday.

Construction of the complex would begin once the company has finalised outstanding regulatory issue with the authorities. "We hope to start construction by second quarter next year," he said.

The complex, targeted to be fully completed by 2015, is located at Port Dickson on a 607.5ha of land. It would include a refinery, petrochemical plant and storage facilities and would be able to produce about 150,000 barrels of oil per day.

The complex was intended to be GPLM's regional hub for its activities in Asia Pacific. The company had earlier secured crude oil supply among consortium members and has finalised initial agreements on products off-take arrangement with several countries within Asean and in Asia Pacific.

Sale of fabrication yards marks Sime’s exit from oil & gas

A year after suffering massive losses from its oil and gas division, Sime Darby Bhd has taken a decision to exit this business by hiving off its two fabrication yards for RM695mil in cash.

Sime Darby has inked two non-binding memoranda of understanding to sell its Teluk Ramunia fabrication yard to Petronas Nasional Bhd for RM296mil and its Pasir Gudang fabrication yard to Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) for RM399mil.

Sime Darby said the disposals followed a recent “portfolio review” and that for the oil and gas division to move up the value chain and enjoy better returns, “the group would need to further commit its financial resources into a business which is no longer in line with the group's strategic decision.”

Sime Darby also said the RM695mil price tag was above the RM641mil book value of the said assets.

Explaining the rationale for move, Sime Darby's president and group chief executive Datuk Mohd Bakke Salleh told StarBizWeek: “There are too many variables in this business. You need to depend on the clients' specifications, you have to get your costing right and there are continuous contract management issues. Do we have really have all this expertise?

“Furthermore there is a lot of reliance on third parties or sub-contractors. We don't want to take on jobs with this type of risk profile. This is a business where the likelihood of losing money is very probable.”

Bakke...‘We don’t want to take on jobs with this type of risk profile. This is a business where the likelihood of losing money is very probably.’

The yards make up the main assets in Sime Darby's oil and gas unit, held under Sime Darby Engineering Sdn Bhd, a unit under Sime Darby's troubled energy and utilities (E&U) division. In FY2010, the E&U division posted RM1.75bil in operating losses, mainly due to cost overruns in its Qatar oil and gas projects.

Interestingly, Petronas' subsidiary, MISC Bhd (itself the parent of MHB) had in 2008 proposed injecting the then unlisted MHB into Ramunia in a reverse takeover of the latter. However, talks fell through and subsequently, Ramunia's fabrication yard was sold to Sime Darby, which is now selling the same yard to Petronas.

Sime Darby had paid RM550mil for Teluk Ramunia, including debts it assumed. It is now receiving about RM250mil less from selling the same yard to Petronas.

Bakke, who was not running Sime Darby when the Ramunia yard was acquired in May 2009, explained that circumstances were different then: “The business direction of Sime Darby was very much on international expansion then. It got a shot in the arm when it was awarded the Qatar projects, hence Teluk Ramunia was acquired to be utilised to undertake big jobs, both internationally and locally.”

Now however, things have changed. “With (oil and gas) fabrication jobs, one can end up losing whatever cash one has and all the resources built up over the years. This is certainly an industry we should not be in. If we can't be a market leader, then we shouldn't be part of it,” he said.

As part of the terms of the sale, MHB will offer employment to all Sime Darby employees in connection with the fabrication yard business on terms to be mutually agreed and that Sime Darby will continue to perform and complete its obligations in respect of its existing contracts.

Meanwhile, CIMB Investment Bank Bhd analyst Ivy Ng said in a report yesterday that the offer price for its sale of its fabrication yards was fair.

“The price tag for the Ramunia yard appears low, at a 47% discount to what Sime Darby paid in 2009. But the group is getting a higher price of RM3.07mil per acre for the smaller Pasir Gudang yard,” Ng wrote, adding the offer price is at 1.08 times book value.

Ng added that potential profits from Sime Darby's existing oil and gas projects “could add another RM86mil to the price consideration, raising the valuation to 1.2 times book value, in line with the value we used for the assets in our sum-of-parts computations.”

Ng also wrote: “We are positive on the group's plan to sell its oil and gas assets as it will remove concerns over potential losses from this division and allows the group to focus on its core businesses.”

Wah Seong tipped for LNG pipe coating job

Wah Seong Corp Bhd is close to bagging a pipe coating job relating to the Australia Pacific liquefied natural gas (APLNG) project.

The company is said to be the front runner in the tender for the APLNG onshore concrete pipe coating contract valued at about RM122 million (US$40 million), sources said, adding that the project is expected to be given out in the next one to two months.

The entire APLNG project involves the development of the coal seam gas resources in the Surat and Bowen Basins over a 30-year period, a multi-train LNG facility on Curtis Island near Gladstone, Queensland, Australia, and a 450km transmission pipeline.

The project owner, Australia Pacific LNG Pte Ltd (APL), is a joint venture between Australian energy giant Origin Energy Ltd and American multinational energy corporation, ConocoPhillips Co.

In late April, APL sealed a deal with state-owned China Petrochemical Corp (Sinopec) for the supply of about 4.3 million tonnes of LNG per year over a 20-year period. The deal entails APL exporting LNG from its gas resources and proposed LNG facility in Queensland to Sinopec’s yet to be constructed Guangxi receiving terminal and other LNG import and gasification terminals in China.

Sinopec’s majority-owned subsidiary, China Petroleum and Chemical Corp Ltd, will take up 15% equity interest in APL, thereby reducing Origin Energy and ConocoPhillips’ ownership in the joint venture company to 42.5% each.

APL is scheduled to export its first LNG cargo in 2015 to Asian markets. The facility’s first two trains have an annual processing capacity of up to nine million tonnes.

MIDF Research expects pipe coating jobs from APLNG to sustain Wah Seong’s near-term earnings on top of its other jobs in Australia. Indeed, Wah Seong’s endeavours in Australia appear to have borne fruit, with its 1QFY11 ended March 31 results lifted by the higher margin RM550 million Gorgon pipe coating project.

Wah Seong’s 1QFY11 net profit more than doubled to RM43.4 million from RM17 million a year ago, beating analysts’ expectations. Pre-tax profit jumped 78.5% year-on-year to RM68.7 million while revenue grew 19.8% to RM490.9 million.

Wah Seong’s pipeline services division continued to be the main earnings driver in 1Q, contributing RM191.7 million or almost 40% of group revenue.

“Wah Seong’s relationship with Chevron in the Gorgon project may help it garner the Wheatstone LNG project, which is to be developed by Chevron as well,” MIDF Research said in a recent report.

Wah Seong expects to reap the benefits from increased investment activities by oil majors, spurred by continued global demand for oil and gas and the current price of crude oil.

Its tender book currently stands at about RM5 billion with over half for overseas pipe coating works, analysts said.

In the longer term, OSK Research said Wah Seong’s recent joint venture with Nasdaq-listed Insituform Technologies Inc would open the door for the company to penetrate the US, Brazil and Gulf of Mexico markets.

For domestic jobs, analysts said Wah Seong is in good shape for a chunk of pipe coating contracts from the Kebabangan northern hub development project off the coast of Sabah.

The Kebabangan petroleum operating company had recently awarded a RM1.15 billion topside contract to Sime Darby Bhd and a RM208 million substructure contract to Kencana Petroleum Bhd.

KNM wins US$72m contract in Uzbekistan

KNM Group Bhd won the bid for a US$71.63 million (RM217.8 million) contract for the development of a documentation and equipment supply facility “booster compressor station” at the Khauzak site in the Republic of Uzbekistan.

The job was secured from Lukoil Uzbekistan Operating Co for a duration of 24 months from the date of commencement of contract and subject to contract signing.

KNM also announced that it recorded a lower net profit of RM19 million for 1QFY11 ended March 31, versus RM40.3 million previously. This was due to a lower tax writeback during the quarter.

Nonetheless, revenue for 1Q rose 10.6% y-o-y to RM413 million while operating profit also increased to RM16.8 million from RM11.3 million a year ago. The group attributed the better operating performance to higher revenue recognised and better margins.

Sime Engineering sells fabrication yards for RM695m

Sime Darby Engineering Sdn Bhd is selling its two fabrication yards for a total of RM695 million, which was above the RM641 million book value of the assets as at 31 March 2011.

It said on Friday, March 27 it was selling its Teluk Ramunia fabrication yard to Petroliam Nasional Bhd for RM296 million cash.

It was also selling its Pasir Gudang fabrication yard to Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) for RM399 million cash.

“The decision to dispose of the assets was made following the completion of the group’s portfolio review exercise,” it said.

Petroleum: Mahkamah Rayuan tolak, Kelantan rayu

Mahkamah Rayuan hari ini menolak rayuan Kerajaan Negeri Kelantan berhubung keputusan Mahkamah Tinggi membenarkan kerajaan persekutuan menjadi pencelah dalam samannya ke atas Petronas berhubung royalti minyak.

Keputusan itu dibuat Hakim Low Hup Beng setelah mendengar penghujahan daripada peguam yang mewakili kedua-dua pihak.

Kerajaan Kelantan diwakili peguam Tommy Thomas.

Exco Kerajaan Kelantan, Datuk Paduka Husam Musa berkata, beliau meminta Tommy memfailkan rayuan ke Mahkamah Persekutuan berhubung keputusan itu.

"Saya telah minta peguam kita untuk memfailkan rayuan ke Mahkamah Persekutuan di atas kedua-dua keputusan tadi," kata beliau kepada pemberita di luar kamar mahkamah selepas mendengar keputusan berkenaan.

Menurutnya, Kelantan tetap berpendapat bahawa Kerajaan Persekutuan tidak perlu campur tangan dalam kes ini kerana tidak memberi sebarang impak kepada mereka.

"Kes ini sebenarnya begitu simple. Jika kerajaan Kelantan menang dalam kes ini, lima peratus bahagian (royalti) Kerajaan Pusat tidak akan berkurangan.

"Kalau Kerajaan Kelantan ditakdirkan kalah dalam kes ini bahagian lima peratus Kerajaan Pusat tak bertambah. Jadi tidak ada apa-apa kesan negatif dan positif kepada Kerajaan Pusat.

"Dan kerana itulah kita masih berpendapat bahawa Kerajaan Pusat tidak perlu campur tangan dalam kes ini kerana kes ini adalah kontrak antara Kerajaan Kelantan dengan Petronas," katanya yang juga ahli jawatankuasa PAS Pusat.

Tambahnya Kelantan berharap agar rayuan di Mahkamah Persekutuan nanti akan diterima.

"Kita berharap Mahkamah Persekutuan mempertimbangkan dan memberi keputusan sebaliknya daripada apa yang diputuskan hari ini," katanya.

Rayuan di Mahkamah Persekutuan boleh dibuat dalam masa 30 hari daripada hari ini.

Sementara itu Mahkamah Rayuan hari ini turut menolak satu lagi rayuan oleh kerajaan negeri berhubung keputusan Mahkamah Tinggi yang tidak membenarkan permohonan bagi kes saman itu dipindahkan semula ke Mahkamah Komersial Baru (NCC).

Kerajaan negeri mahu kes itu dipindahkan semula memandangkan saman berkenaan pada mulanya difailkan di NCC, tetapi kini akan didengar di Mahkamah Sivil Baru (NCvC).

Pada 30 Ogos tahun lalu, kerajaan Kelantan memfailkan saman terhadap Petronas di Mahkamah Tinggi Kuala Lumpur kerana mendakwa syarikat petroleum nasional itu tidak membayar royalti yang dianggarkan RM800 juta setahun sejak 2005.

Menurut kerajaan negeri, tindakan Petronas itu bukan sahaja melanggar undang-undang sedia ada, tetapi juga bercanggah dengan Perlembagaan Persekutuan.

Dalam pernyataan tuntutannya, kerajaan negeri antara lain memohon perintah untuk mendesak Petronas supaya mendedahkan kesemua fakta berkaitan pembayaran tunai yang patut dibayar kepada Kelantan.

Ia termasuk tempoh petroleum dikeluarkan, dijumpai atau diperoleh di pesisir Kelantan; kawasan atau blok tempat petroleum dijumpai dan diperoleh; dan jumlah keseluruhan pembayaran tunai yang patut dibayar kepada Kelantan.

Kerajaan negeri turut mendesak agar semua pembayaran tunai tertunggak yang ditetapkan oleh mahkamah mesti dibayar dalam tempoh satu bulan daripada perintah mahkamah dikeluarkan.

BASF Increases Chinese, Malaysian Capacity as Asian Demand Rises

BASF SE (BAS) Deputy Chief Executive Officer Martin Brudermueller said the chemical industry will draw most of its growth from Asia in coming years, underscoring the role of emerging markets for the German company.

BASF, which won approval in March for a plant in Chongqing in the west of China, expects global chemical demand to expand by 1.1 trillion euros ($1.5 trillion) until 2020, with Asia accounting for 700 billion euros of that amount, Brudermueller said in a Bloomberg TV interview in Hong Kong, where he has been based for five years.

BASF and joint venture partner China Petroleum & Chemical Corp., known as Sinopec, are expanding a flagship Asian Verbund site in Nanjing, China, where the companies will have 30 integrated factories, Brudermueller said. The Ludwigshafen, Germany-based chemical maker is also expanding its production in Kuantan, Malaysia, he said.

The company said this month it’s on course to double sales in the Asia-Pacific region by 2020, based on revenue of 9 billion euros in 2008.

“It’s exactly the right moment to emphasize how important Asia Pacific is for the growth of BASF,” Brudermueller said. “There are a lot of big investments out here, a lot of opportunities that need to be shaped. And I think it’s important to stay out here.”

The factory in Chongqing, expected to start operations in 2014, will produce diphenylmethane diisocyanate, or MDI, used in polymers for coatings and adhesives. BASF invested 860 million euros in the site, which is wholly owned by the German company, Brudermueller said.

Shell allots $1.1B for Malampaya development project

The Shell Group of Companies in the Philippines, the local arm of Royal Dutch Shell Plc., has programmed $1.1 billion in funds development the next phase of the Malampaya gas project, chairman Edgar Chua told reporters.

In an interview, the Shell official made it clear that the budget will be spent over the next three years to fund development works for the second phase of Malampaya.

This amount is on top of the planned investments for its downstream or retail business. Chua said his company usually spend P2 billion to P3 billion every year.

Chua noted that the annual budget for its downstream business covers expenses in maintaining the storage facilities, upgrade or improve the refinery facility as well as to put up or refurbish retail stations.

For the refinery, Chua said they continue to pour in investments in reliability.

In another development, Chua said they are also interested in helping the Government in setting the needed infrastructure for the import of liquefied natural gas into the country.

“We are interested in seeing how we can participate in the LNG program of the government, and we have always been looking at coming in with potential local partners, if we [decide to] participate,” Chua said.

For an LNG infrastructure, he added that facilities and pipelines must be imported and a power plant needs to be built. “So for us, our interest is primarily on supplying the LNG or import facility and the other needed infrastructure, particularly the regasification units and its pipeline as well,” Chua said.

Energy Secretary Jose Rene Almendras earlier said the department expects to bid out liquefied natural gas projects (LNG) it has laid down by early next year.

Almendras said the technical feasibility studies for LNG facilities of the Japan International Cooperation Agency for Luzon and of the World Bank for Mindanao are expected to be finished by September.

The World Bank, in particular, wants a study that will determine the volume or capacity of LNG facilities that can be put up in Mindanao.

Upon completion of the master plan, Almendras said it will take them three months to prepare the terms of reference for the LNG projects to be bid out to investors. “We really hope to bid out it by early next year,” he said.

As it is, Almendras said there are a lot of interested investors and it’s good to have a lot of interested investors for competition.

Almendras declined to name the investors but said the investors are American, European, Italian and Japanese companies interested to put up the pipeline that will

Almendras quickly admitted though that China’s recent signing for a huge LNG contract with Australia bother him a bit.

“I hope there will be left on our plate, though I’m also confident that there still is something left for us as there is still a lot of LNG suppliers. But of course, pricing will be affected,” he said.

Almendras said LNG prices have recently gone up because of Japan. The Japanese are building 600 megawatts of LNG generation facilities, which is expected to come on stream in the next two to three months.

Almendras earlier said the government is set to bid out the Batangas-Manila gas pipeline (Batman 1) project and the LNG regasification and receiving facilities.

The proposed 100-km Batman 1 pipeline, initially estimated to cost around $100 million, is supposed to run from the Malampaya gas project in Batangas to Sucat, Paraéaque but government now wants it to run up to Quirino using “road right of ways.”

“The pipeline would cost half a billion dollars, the regasification and receiving units would probably cost around $700 million to $800 million. We will bid it out. We’re going to get the best possible deal for the government,” he said.

Almendras pointed out that the Philippine National Oil Co. can form a joint venture with the winning bidder because it owns the franchise for the pipeline.

“As far as the receiving and regasification facilities are concerned, it’s going to be done through Public-Private Partnership, which has already attracted a number of groups already,” Almendras said.