Oil & Gas Sector - First gas for North Malay basin project in 1Q13 OVERWEIGHT

- Upstream reported that the North Malay basin project is going ahead as planned with first gas from the Kamelia field expected by 1Q2013. Petronas Carigali and US independent Hess have formalised the arrangements under which they will invest US$5.2bil (RM16bil) in the next five years on the new North Malay basin integrated gas development off Peninsular Malaysia.

- The integrated gas development is enabled via three new production-sharing contracts (PSC) signed by national oil and gas company Petronas. The three PSCs are an amended PSC for Block PM 302 and new exploration PSCs for blocks PM 325 and PM 326B, adjacent to Block PM 302.

- All three contracts will be held on a 50:50 basis by Hess and Petronas Carigali. The project involves the development of nine stranded gas fields with a new gas gathering, processing and transportation hub to commercialise about 1.7 trillion cubic feet of gas. The required facilities will include a 300-kilometre gas pipeline and new first-of-its-kind onshore slug catcher with an acid gas removal system using the acid gas removal membrane technology that is co-owned by Petronas.

- Petronas and Hess are expediting the implementation of an early production system (EPS) that is targeting first gas in the first quarter next year at a rate of 100 million cubic feet per day. The EPS will focus on the Kamelia field, discovered on Block PM 301, but which now comes under the newly-expanded PM 302.

- The fast-track development of Kamelia will use a leased gas floating production, storage and offloading vessel from Ezra Holdings’s Lewek Arunothai. The FPSO, which will be chartered for an initial three-year term, will be installed alongside the wellhead platform that SapuraKencana Petroleum is currently constructing in Lumut, Malaysia. Note that SapuraKencana has not announced the award of this contract yet as the technical and financial specifications are still being negotiated.

- Other fields in the North Malay basin project include Zetung, Gajah, Melati, Angerik and Kezumba. The full-field development, which is expected to centre on the much larger Bergarding field in Block PM 325, is due to come into operation in the second quarter of 2015, and this will yield about 250 MMcfd of gas.

- Malaysia is pulling out all the stops to boost gas supply and security, including initiatives for enhanced recovery and liquefied natural gas import schemes. Hess and Petronas Carigali are also fast-tracking development of the Belud oil discovery in Block SB 302 offshore Sabah, East Malaysia. This shallow-water project calls for an FPSO and wellhead platform. Upstream indicated that M3nergy with Emas is in a strong position to land this floater job against Malaysian rivals MISC and Bumi Armada. First oil from Belud is being targeted for 2014.

- Against the backdrop of escalating requirements for more specialised and higher scale engineering capabilities, we maintain MMHE as our top pick in the sector as it is the only domestic yard which has a proven track record in complex engineering platforms with deepwater capabilities.  We also retain our OVERWEIGHT view on the sector with our other BUY calls being SapuraKencana, Petronas Gas, Bumi Armada and Dialog Group.

Source: AmeSecurities