Malaysia's oil and gas (O&G) sector is set for exciting days ahead as national oil company Petroliam Nasional Bhd (Petronas) prepares to dish out more contracts this year and commence mega projects, according to HwangDBS Vickers Research.
“We expect Malaysia's O&G upcycle to start in 2012 with Petronas going full throttle to sustain oil production. Petronas' record RM300bil five-year capital expenditure will be a strong re-rating catalyst for Malaysian O&G players.
“Critical gas shortage in the country has also prompted Petronas to fast-track upstream activities, which will benefit local players,” analyst Quah He Wei said in a report.
Petronas had last year announced a spate of major investments such as the RM5bil development of marginal oilfields, RM46bil for enhanced oil recovery, RM15bil for the North Malay Basin Project and the RM60bil Refinery and Petrochemical Integrated Development (Rapid).
A detailed feasibility study for Rapid would be concluded by year-end and Petronas aims to achieve commissioning by 2016, according to HwangDBS.
The research house said that to enhance midstream to downstream O&G activities and establish Malaysia as a regional oil storage and trading hub, the first independent deepwater petroleum terminal would be built in Pengerang, Johor.
In October, Dialog Group Bhd was given exclusive rights by the Johor government to develop the deepwater terminal for 60 years. HwangDBS said construction of the first phase had begun, with 5% completion achieved on Dec 11, 2011.
Benalec Holdings Bhd was also granted the right to reclaim 3,485 acres in Tanjung Piai, Johor, for an O&G industrial park to cater to companies across the entire value chain of the industry.
With a further 22 marginal oilfields identified for development, more risk service contracts could be expected by mid-2012, given that bidders are to submit proposals by the first quarter, according to HwangDBS. Marginal fields are oilfields with limited reserves.
“Gone are the days of easy oil in shallow local waters as depleting oil resources is a global phenomenon,” HwangDBS said, adding that Petronas' recovery factor was estimated at 26% for main oilfields, compared with the 46% average in the North Sea.
However, it said this could be improved with optimal production techniques and knowledge exchange.
HwangDBS's stock picks for the sector include Bumi Armada Bhd, Dialog and Dayang Enterprise Holdings Bhd.