AmResearch maintains "Overweight" on O&G sector

Published: Wednesday June 12, 2013 MYT 10:54:00 AM

AmResearch maintains "Overweight" on O&G sector

KUALA LUMPUR: AmReseach maintains its “Overweight” call on the oil and gas (O&G) sector with “Buy” calls for SapuraKencana Petroleum, Alam Maritim, Dialog Group and Petronas Gas.

It said Petronas president Tan Sri Shamsul Azhar Abbas has indicated that new discoveries and technological advances will enable global recoverable resources to last for the next two centuries based on current trends of consumption.

It added the technological changes that have driven new production gains from unconventional sources would not lessen gas prices due to higher extraction costs and huge investment costs in building liquefaction facilities to ship US gas to Asia.

With that, AmResearch said gas consumption will rise due to population growth, urbanisation in Asia, and rapid Eastern economic growth.

It said BG Group chief operation officer Martin Houston noted an oversupply of gas is unlikely to happen, which should be taken up by latent demand while supply dynamics require a long lead-time.

AmResearch said Facts Global Energy expects oil prices to have a floor of US$80 per barrel and a ceiling of US$120 per barrel, with some weakness likely in 2015 and 2016 with the commencement of US liquefied natural gas (LNG) exports.

“But any price lower than the floor will lead to a production drop in unconventional oils such as shale liquids,” it said.

AmResearch said as LNG becomes the fastest growing energy segment, floating regassification projects, such as floating storage regassification units will increase.

“In 2015, Petronas will be the first company in the world to operate a floating LNG vessel at the Kanowit field,” it said.