Party continues in oil and gas BY TEE LIN SAY

by **Cals** Sun 29 Dec 2013, 23:43

Published: Saturday December 28, 2013 MYT 12:00:00 AM
Updated: Saturday December 28, 2013 MYT 1:26:33 PM
Party continues in oil and gas
BY TEE LIN SAY
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In December alone, Petronas has awarded 13 work packages to six local companies.

WHAT’S in store for 2014 in the oil and gas sector? A continuation of the party in 2013, that’s what!
There should be more contract awards and even mergers to keep local companies competitive for bigger projects.
On the back of this, oil prices have remained strong, nudged by upward pressures from the habitual Middle Eastern political turmoil and military strikes. West Texas Internmediate (WTI) oil prices have climbed some 6% on a year-to-date basis to settle around US$97 (RM400.70) as of end-December. Oil reached a two-year high of US$110.3 (RM341.93) in August.
In December alone, Petroliam Nasional Bhd (Petronas) has awarded 13 work packages to six local companies, involving hook-up and offshore platform maintenance contracts worth a combined RM10bil, spread over five years.
Year to date, RM44bil worth of jobs have been awarded by Petronas to Malaysian oil and gas companies, a three-fold increase from what was awarded in 2012.
“As such, we believe that moving into 2014, the level of oil and gas activities will remain high and this will translate into higher corporate earnings for the companies,” says MIDF oil and gas analyst Aaron Tan Wei Min.
Main beneficiaries so far have been SapuraKencana Petroleum Bhd, Malaysia Marine & Heavy Engineering Bhd (MMHE), Barakah Petroleum, Boustead Heavy Industries Corp Bhd and TH Heavy Engineering Bhd.
Tan’s WTI average crude oil price forecast for 2014 is US$94 (RM291.40). Although this is lower that his 2013 forecast of US$96.50 (RM299.15), he is still optimistic that global oil and gas activities will be sustained in high gear as long as oil prices averaged at above US$90 (RM279).

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The Petronas refinery in Kerteh, Terengganu.
For 2014, a few key developments are anticipated.
Firstly, there’s the final investment decision by Petronas on the RM60bil Refinery and Petrochemicals Integrated Development (Rapid) complex in Pengerang, Johor by the first quarter of 2014.
“We view this as a positive sign as it will spur the downstream petrochemical sector. So far, Petronas has signed agreements with Versalis SpA (Italy), Itochu (Japan) and PTT Global Chemicals (Thailand) as joint-venture partners to build specialty chemical plants. We do not, however, think that the Rapid initiative will directly benefit most Bursa-listed oil and gas service providers as these companies are mainly upstream offshore support service providers. It will, however, be a positive news-based catalyst for the sector as a whole,” says Tan.
He adds that the sector will see growth in capital expenditure in 2014, with the likes ofBP Plc, ExxonMobil, Chevron Corp and Royal Dutch Shell among others increasing spending to US$425.1bil (RM1.32 trillion) from US$421.2bil (RM1.31 trillion) a year earlier.
“We view the increase in capex spend as an important signal which indicates two important future perceptions: (i) International oil corporations are optimistic that oil and gas shall remain the world’s foremost energy of choice in the years to come, and (ii) Oil prices will sustain at a level high – enough to incentivise major oil producers to increase exploration and production activities,” says Tan.
Thus, subsegments of the industry which stand to benefit are structural fabrication works, vessel building and chartering, pipe-related works, offshore support services and supply of ancillary products.
Tan remains positive on 2014, saying it will mirror 2013 with strong award of contracts, new oil and gas discoveries and new mergers and acquisitions to further strengthen local companies to compete globally.
Boustead Heavy Industries Corp Bhd (BHIC) managing director Tan Sri Ahmad Ramli Mohd Nor says the company has recently signed a contract with Murphy Sarawak Oil Co Ltd for one topside and activity levels are on the rise.
“Major developments will result because of continued spending by oil majors such as Petronas, Shell and ExxonMobil. We expect more tenders and awards such as Nippon Layang Wellhead Project, Shell E-6 Wellhead Project, as well as Petronas Sepat CPP and wellhead,” says Ramli.
He feels the major constraints for BHIC and other industry players will be yard capacity and human capital to take on all the extra work.
Perisai Petroleum Teknologi Bhd managing director Izzet Ishak expects activity levels to remain high in 2014, both domestically and beyond Malaysia. He expects the buoyancy seen in 2013 to carry through to next year.
Not surprisingly, he believes the domestic oil and gas industry will continue to be driven by Petronas’ continued focus on ensuring sustainable oil and gas production over the long term.
“This direction will continue to place emphasis on the exploration of new oil and gas blocks, the continuing development of marginal fields as well as stepping up efforts in bringing out the best of existing fields through the enhanced oil recovery initiatives,” says Izzet.
Izzet says 2014 will be a year in which Perisai will get its drilling division off the ground by taking delivery of its newbuild jackup drilling rig, the Perisai Pacific 101.