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  21st July 2008 - STAR MARITIME

Spillover effects of O&G industry

THE Malaysian oil and gas (O&G) industry is expected to unleash huge growth opportunities for related organisations especially in the exploration and development of deepwater fields.

AmResearch said in a recent sector update that within six years from the maiden discovery of the first deepwater field – Kikeh in 2002 – Malaysia now had at least 26 deepwater fields.

“Kikeh and Gumusut-Kakap alone account for almost 15% to 30% of Malaysia’s total oil reserves, and is expected to increase current oil production by 38% or 250,000 barrels per day,” it said.

According to the report, the Kikeh field’s estimated oil reserves was 400 million to 700 million barrels of oil equivalent (boe) or about 7% to13% of the nation’s oil reserves of 5.4 billion boe last year.

It said the second deepwater development, the Gumusut-Kakap, was currently ongoing and would increase current oil production by at least 20%.

The report said the development of deepwater fields would soon broaden to six other fields – Malikai, Kebabangan, Jangas, Ubah, Pisangan and Kamunsu thus boosting demand for floating, production, storage and offloading (FPSO) units, semi-submersible platforms, deepwater drilling rigs, anchor handling tug and supply vessels as well as other offshore support vessels (OSVs).

The research house maintains an overweight call on the O&G sector.

Ramunia Holdings Bhd is expected to gain significantly after the confirmed reverse takeover (RTO) by MISC Bhd scheduled for completion in the fourth quarter of the year.

Post the RTO, Ramunia will become the largest and only deepwater offshore fabricator in Malaysia. The enlarged group will have access to yard space totalling 260 acres with 836 meters of shoreline.

“MMHE which has first right of refusal for all Petroliam Nasional Bhd's (Petronas) deepwater offshore structure requirement is running close to optimum utilisation in its yard.

“Hence, additional yard space would be required to undertake upcoming projects,” it said.

AmResearch said MMHE was also being positioned by Petronas to be the leading deepwater engineering services entity. MMHE has already fabricated two deepwater FPSOs and was awarded a RM2bil contract to build a semi-submersible platform.

Another significant player in the deepwater O&G industry is SapuraCrest Petroleum Bhd.

The group which focuses on deepwater pipe laying work, is banking on its pipe laying vessel, Sapura 3000 to win the contract for the Gumusut-Kakap project.

“We believe SapuraCrest is in the running to secure a pipe laying contract worth RM1.5bil to RM2.0bil for the Gumusut-Kakap deepwater development project.

“This will increase its existing order book by 36% to 47% to RM5.7bil to 6.2bil from the current RM4.2bil.

“The sizeable contract will improve Sapura 3000’s utilisation (especially for deepwater works) and would boost the division’s margins going forward,” it said, adding that deepwater pipe laying works had pre-tax margins of about 10% to 15%.

Besides Sapura 3000, the report said, SapuraCrest's other strong O&G assets provided significant leverage for the group to benefit from the robust offshore demand and rising charter rates.

The group’s drilling rig, Teknik Berkat, secured a new charter contract last April with rates 45% higher than the previous contract.

“Its drilling division’s joint venture with Seadrill is also expected to generate steady recurring earnings of about RM61mil to RM84mil from the year ending Jan 31, 2009 to 2011 underpinned by secured charter contracts over the period,” it said.

Dialog Group Bhd, a tankage facilities and services provider, involved in the entire O&G value chain should be reaping the short-term and long-term benefits of the industry's cycle.

“We anticipate growing contribution from its centralised tankage facility division due to mounting requirement for tankage facilities in Johor as well as globally. This will drive Dialog's future earnings.

“Insufficient tankage facilities in Singapore to meet robust demand will work well for Dialog's joint venture with MISC and Trafigura,” Amresearch said.

It expects at least five more tank terminals to be erected on the Dialog-MISC JV's 40-acre leased land.

“Dialog's second tankage facility in Port Tanjung Langsat, Johor will lift its 2009 to 2010 earnings by 11% to 12% per annum,” it said.


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