Robust O&G Malaysian sector seen in 2014

PETALING JAYA: Local oil and gas (O&G) service providers continue to be in focus after Petroliam Nasional Bhd (Petronas) started the year with a five-year umbrella contract awarded to four engineering services contractors.

Fabricators like SapuraKencana Petroleum Bhd, TH Heavy Engineering Bhd, Malaysia Marine & Heavy Engineering Holdings Bhd (MMHE) and Boustead Heavy Industries Corp Bhd were among the much-talked-about indirect beneficiaries of the contracts awarded to Technip Consultant (M) Sdn Bhd, Perunding Ranhill Worley Sdn Bhd, RNZ Integrated (M) Sdn Bhd and MMC Oil & Gas Engineering Sdn Bhd.

Petronas is expected to conduct a closed competitive bidding among the four parties to select the technically capable and commercially attractive bidder, with the work scope covering domestic upstream O&G engineering services, including front-end engineering design and detailed design works, of which generally run into multi-billion-dollar contracts.

This is part of the national oil company’s RM300bil capital expenditure budget till 2017 in a bid to reverse declining production.

AmResearch analyst Alex Goh said of the parties awarded, only Technip had a strong relationship with MMHE via its 8% equity stake in MMHE and multiple joint ventures in Petronas’ projects.

“But the other three engineering companies do not have singular links with domestic fabrication yards. This means they are likely to work with other fabricators who have proven capabilities in engineering, procurement, construction and commissioning (EPCC) services,” he said.

He said the projects likely up for grabs were the Sepat, Bergading, Baronia, Bokor and Dulang fields, which would possibly be opened for tender this year.

“The first is likely to be the US$1.5bil central processing platform (CPP) turnkey contract currently being undertaken on a three-way front-end engineering and design contest on Petronas’ challenging multi-platform Sepat gas-processing project off Peninsular Malaysia.

“The other project is the Bergading CPP for Hess’ North Malay basin gas cluster programme. There are other smaller platform jobs such as in the Nosong, Muda and Belum fields, which are currently in the tendering process,” he said.

Goh added that the pace of work orders for the O&G industry had surged by 7.5 times quarter-on-quarter (q-o-q) in the fourth quarter of 2013, and 1.7 times year-on-year to RM12bil largely due to the award of the Pan-Malaysian transportation and installation umbrella contract and Kraken floating production, storage and off-loading charter to Bumi Armada Bhd.

“While first-quarter 2014 orders are likely to slow down q-o-q, the overall upward momentum is still intact,” he said.

Another analyst said second-liners like Alam Maritim Resources Bhd, Dialog Group Bhd and Barakah Offshore Petroleum Bhd would also benefit from the spillover of contracts once a main contractor is awarded for any EPCC works.

“With the amount of ongoing O&G activity, there would be a strong flow of contracts and works, which would contribute to a robust sector,” he said.