Multiple flows of contracts from O&G this year MHB VS THH

by **Cals** Mon 17 Jun 2013, 11:19

Multiple flows of contracts from O&G this year

Business & Markets 2013

Written by AmResearch

Monday, 17 June 2013 10:37

Oil and gas sector
Maintain overweight: Last Friday, Upstream reported that Petroliam Nasional Bhd (Petronas) will be undertaking a three-way parallel front-end engineering and design (Feed) tender as early as this month for the US$1.5 billion (RM4.68 billion) multi-platform Sepat gas processing project off Peninsular Malaysia.

Petronas opened a pre-qualification exercise in March this year for international oilfield services providers, with plans to shortlist at least three contenders, made up of yard owners and engineering outfits, to complete parallel Feed studies for the project.

The Feed competition is scheduled to begin late June and will lead to the award of an engineering, procurement, CONSTRUCTION [], installation and commissioning contract to the winning team. Sepat gas is said to contain over 40% carbon dioxide in the gas leg of this producing oilfield.

The planned Sepat platform is also being considered as a hub for neighbouring greenfield and brownfield developments, according to sources.

The first phase of the project will involve a central processing platform (CPP), equipped with an acid gas removal unit, weighing over 27,000 tonnes. The platform will come with a flare tower and will be bridge-linked to a wellhead platform under Sepat’s first development phase. A second wellhead platform will also be tied in to the hub platform via a 12km flowline.

Gas will be exported via two 200km pipelines — one with a 10-inch diameter and the other, 24-inch diameter — to an existing gas terminal in Terengganu, which will undergo modification to receive the output from Sepat. While the stage was initially set up for an international contest, local content preference remains a key consideration for the Sepat tender.

Upstream indicated that an alliance between Italy-based Saipam and SapuraKENCANA PETROLEUM BHD [] has emerged as the favourite bidder. The two other bidders, consisting of joint-ventures, are: (i) France’s Technip and its yard partner, Malaysian Marine and Heavy Engineering Holdings Bhd; and (ii) US-based McDermott and TH Heavy Engineering Bhd, which has a yard in Pulau Indah, Klang.

This development is not a surprise, as we had highlighted in past reports that there are up to 10 central processing platforms, such as Semarang, Bergading, Baronia, Bokor and Dulang, which will be open for competition in Malaysia over the next two to three years. We expect the Semarang CPP to be awarded soon to SapuraKencana.

Contract rollouts have accelerated after the 13th general election, with orders for the second quarter (2Q) of 2013 thus far reaching RM7.8 billion from RM4.2 billion in 1Q13.

By 1Q14, the final investment decision for the RM60 billion oil refinery and petrochemical integrated development project in Pengerang, Johor, will be made but Petronas is already calling for a tender for Package 8 involving the construction of cumene, phenol and bis-phenol A production units. This looks set to catalyse multiple tank terminal projects in southern Johor.

In the short- to medium-term, excitement in the sector will still largely stem from the larger field projects in Malaysia such as the enhanced oil recovery projects; gas cluster developments for the North Malay basin; as well as in
Sabah and Sarawak which are tied to the completion of the Bintulu LNG complex expansion in 2015.

In view of the multiple flows of contracts this year, we maintain our overweight call on the oil and gas sector with “buy” calls for SapuraKencana Petroleum, Alam Maritim Bhd, Dialog Bhd and PETRONAS GAS BHD []. — AmResearch, June 14

This article first appeared in The Edge Financial Daily, on June 17, 2013.