Petronas invites expressions of interest for Baronia CPP

by **Cals** Wed 16 Oct 2013, 13:50

Business & Markets 2013

Written by Affin IB Research

Wednesday, 16 October 2013 09:58

Oil and gas sector
Maintain overweight: Industry publication, Upstream, has reported that Petroliam Nasional Bhd (Petronas) has invited expressions of interest from international contractors in a pre-qualification exercise for a new central processing platform (CPP) to be installed as part of the second phase of its Baram Delta gas gathering (Bardegg-2) project on the Baronia field located off Miri in Sarawak.

Petronas is set to offer an engineering, procurement, construction, installation and commissioning (EPCIC) contract for the platform to be installed there. The formal tender document is expected to be issued by March 2014 at the latest, leading to the potential award of the contract in early 2015.

The Baronia CPP will be equipped with gas processing and compression facilities including condensate stabilisation, gas and water injection and water treatment units. The topside of the CPP is expected to weigh over 13,000 tonnes. The total weight of the CPP, together with an eight-legged jacket, is estimated at 22,000 tonnes. The CPP is the anchor infrastructure of the Bardegg-2 project, which also includes a new 16-slot drilling platform. Produced water and non-associated gas will be transported from the new drilling platform to Baronia CPP for treatment and compression before being re-exported to existing production structures for injection.

In November 2011, Petronas and Shell signed a heads of agreement (HOA) for two 30-year production sharing contracts (PSCs) for enhanced oil recovery (EOR) projects offshore Sarawak and Sabah.

Their joint studies have earmarked six fields — Betty, Bokor, Baram, Baronia, West Lutong and Tukau — for EOR efforts.

In addition to the Bardegg project, Petronas has also carried out a separate study for a multi-platform EOR development in the Bokor field, which is understood to be undergoing field economics studies.

We are positive on the news flow as it reaffirms our view that Malaysia’s oil and gas (O&G) sector is still buoyant and there are several major O&G projects in various pre-development stages. We expect higher contract awards and/or stronger news flow in the fourth quarter of 2013 or first half of 2014 to further rerate the share prices of O&G companies. Maintain “overweight”. Our top picks for the sector are SapuraKencana Petroleum Bhd (“buy”, target price [TP]: RM4.62) and Alam Maritim Resources Bhd (Buy, TP: RM1.80).'

[You must be registered and logged in to see this image.]

The winning of the SK316 EPCIC project has significantly lifted Malaysia Marine and Heavy Engineering Holdings Bhd’s (MHB, “sell”, TP: RM3.30) earnings visibility. While the SK316 contract alone is not sufficient to rerate MHB’s share price, we have turned less negative on the company. — Affin IB Research, Oct 14

This article first appeared in The Edge Financial Daily, on October 16, 2013.