KUCHING: The oil and gas (O&G) sector is currently abuzz with positive news flow as players continue to see excitement from merger possibilities, new discoveries and contracts being awarded.
POSITIVE NEWSFLOW: The O&G sector is abuzz with positive newsflow as players continue to see excitement from merger possibilities, new discoveries and contracts being awarded.
• Ongoing merger possibilities
The highly-anticipated consolidation of SapuraCrest Petroleum Bhd (SapCrest) and Kencana Petroleum Bhd (Kencana) will result in a giant which will be one of the largest caps to list on Bursa Malaysia.
The merger appeared to be well under way with the board of directors of both SapCrest and Kencana approving the merger exercise recently, deciding to take up the offers made by special purpose vehicle, Integral Key Sdn Bhd.
“The RM11.9 billion merger of SapCrest and Kencana is literally ‘one big approval’ away before officially creating the country’s largest oil and gas service provider by asset size,” said OSK Research Sdn Bhd (OSK Research) in its online report.
“We view the merger between Kencana and SapCrest positively as we see both their businesses complementing one another despite minor duplication in their less important business segments.”
• New Sabah offshore discoveries
Other highlights within the sector, noted ECM Libra Capital Sdn Bhd (ECM Libra) head of research Bernard Ching, was the significant gas discovery offshore Sabah by Petronas Carigali Sdn Bhd (Petronas Carigali).
“Lundin Petroleum AB and its joint venture partner, Petronas Carigali, have made a second gas discovery offshore Sabah.
“The company said the discovery was with the Cempulut-1 well that was drilled in block SB303, off Sabah,” Ching said.
He went on to reveal that the first of the two shallow-water discoveries off the west coast of Sabah was made with the Zuhal East-1 Wildcat in the Samarang Asam Paya Block with about 550 billion square cubic feet (scf) of gas reserves, located some 130 kilometres south-west of the state capital Kota Kinabalu.
The second was the Menggatal-1 Well in Block SB 312, with an estimated. 650 billion scf of gas reserves.
• More prospects in FPSO
Another O&G segment currently seeing good newsflow was in the floating production, storage and offloading (FPSO) division.
With regards to bidding activities in the region, six big cap players were in the running to supply FPSO to the Belud Development in Sabah Block SB 302.
The six bidders were Malaysian players Bumi ArmadaBhd, M3nergy Bhd (M3nergy), MISC Bhd (with SBM Offshore Group), Singaporean-based Emas Offshore Construction Ltd, global player BW Offshore Ltd and Rubicon Offshore International.
“The successful bidder is required to supply a converted Aframax-sized FPSO with the capacity to process 7,500 barrels per day (bpd) of oil and a combined 15,000bpd of liquids plus 150m standard cubic feet per day (scfd) of gas from up to seven subsea risers,” affirmed Ching.
In another bidding, M3nergy, Singaporean Tanker Pacific and Indonesian Berlian Laju Tanker were in the running to supply an FPSO to the Bukit Tua field in Indonesia.
“This FPSO is expected to store up to 600,000bpd and process 50,000bpd of liquids,” the head analyst noted.
“The floater contract will be among the first to fall under Indonesia’s Cabotage law, requiring vessels to be Indonesian flagged or 51 per cent owned.” Ching also mentioned logistics company, Yinson Holdings Bhd, fast becoming an interesting O&G play with a recent contract win from vietnam to build a floating storage and offloading vessel.
• Land dynamics for Coastal
Other occurrences within the O&G sector were OSK Research affirming the position of both Coastal Contracts Bhd (Coastal) and Dayang Enterprise Holdings Bhd (Dayang) after a corporate visit to their respective premises in Sabah.
According to OSK’s O&G analyst Jason Yap, Coastal was capable of accommodating work for O&G structures for either fabrication, or repair and maintenance purposes due to the group’s massive available land area.
“We were fortunate that we managed to witness a supply vessel being constructed at Coastal’s yard and boarded it to get a feel of how a vessel crew travel, work and live at sea,” Yap added.
“We also saw some offshore supply vessels (OSVs), tug boats and barges being constructed or undergoing repair and maintenance along the river bank.” OSK Research’s intention for visiting the shipyard, Yap highlighted, was to give its clients a glimpse into the work that goes into getting a yard ready for O&G fabrication, repair and maintenance works.
“We believe that Coastal has the potential to move into this business segment once it finds a business partner,” Yap affirmed.
• Viable warehousing site for Dayang
Regarding its visit to ’s warehouses in Labuan, Yap opined that the group’s location for its warehouses was strategically located opposite the Labuan Shipyard, which facilitated the logistics and transportation of O&G structures.
“The group has two warehouses, located side by side. The first warehouse stores consumables for Dayang’s clients while the second warehouse provides space for the company’s workers to perform minor fabrication works.”
“Our main purpose for visiting Dayang was to allow our clients to see for themselves that brownfield services are required all year round, as they later observed from the high demand for Dayang’s warehouse space from the company’s customers (the oil majors).”
In conclusion, both firms sustained an overweight outlook on the industry and held the belief that O&G will see more uptake in months to come.