More capital expenditure to fuel oil and gas sector in 2012

KUALA LUMPUR: The aggressive inflow of capital expenditure (Capex) into the development of marginal oil and gas (O&G) fields or enhanced oil recovery projects by Malaysian O&G players, is set to continue in 2012.
Over the past 12 months, national O&G entity, Petronas Bhd, has been busy boosting production not only to catch up with the previous year’s higher output, but also achieve this more efficiently, said OSK Research.
The firm added that the national oil corporation’s total O&G production had dropped to 2.1m boe/day in financial year 2011 from 2.3m boe/day previously, “Hence, Petronas together with its production sharing contract (PSC) parties, has been progressively pouring Capex into the development of marginal O&G fields or enhanced oil recovery (EOR) projects.
“Both types of projects are expected to help it meet its higher O&G output objective in the shortest possible time and also at a lower production cost vis-a-vis the greenfields or more sophisticated fields,” OSK Research said.
The research firm also predicts that more marginal oilfields will be awarded in 2012.
In 2011, Petronas awarded two clusters of marginal O&G fields, namely the Berantai cluster to Kencana and SapuraCrest, and the Balai cluster to Dialog Bhd.
These fields are fast-track projects that are expected to commence O&G production in one or two years, against the more sophisticated deepwater fields, which may take between three-five years to kickstart.
“Going forward, there are numerous new development opportunities, since Petronas intends to develop about 25 per cent of the 100 remaining marginal O&G fields identified,” OSK Research said.
It added that given the exposure and experience, it will not be surprising if once again, Kencana, SapuraCrest and Dialog, are awarded the projects.
Also, next year, the focus on enhanced oil recovery (EOR) projects are slated to continue.
This is because the additional Capex needed to extract the remaining O&G is far less than that for a greenfield.
Recently, Petronas and Shell signed a Heads of Agreement for two 30-year production sharing contracts, involving EOR projects offshore Sabah and Sarawak.
OSK Research said the future growth of the sector is more likely to be via mergers and acquisitions.
“We think that growth through acquisitions or mergers is more likely compared to organic growth, as the O&G industry is becoming more dynamic.
“Companies are required to provide a complete range of services as well as deliver them reliably and in a timely manner.
“Petronas and its production sharing contract parties would rather place the main project responsibility on a single O&G contractor to get the entire job done, than award smaller portions to multiple contractors, which may give rise to a risk of delivery delays and cost overruns.
“As such, we believe there may be a consolidation among the vessel players and brownfield services providers,” the research house said. – BERNAMA

Leave a Reply

Your email address will not be published. Required fields are marked *