Oil & Gas Sector - Multi-platform North Malay basin tender to roll out soon Overweight

OVERWEIGHT

Investment Highlights 

• Upstream reported that the bidding process for multi-platform fabrication jobs in the US$5.2bil (RM16bil) North Malay basin project is expected to rollout soon following US-based Hess’ surveys of local yards, which were conducted after the group signed a 50:50 production sharing contract with Petronas Carigali early last month. This is in preparation for a formal tender for the production facilities of the full field development of the cluster gas and condensate project off Terengganu, Malaysia. 
• The nine fields. covering three production blocks, include the giant Bergading field in Block PM 325, the Bunga Dahlia and Teratai discoveries in Block 302 and six other finds in Block PM 301- Gajah, Melati, Kamelia, Zetung, Anggerik and Kesumba. The initial development proposal floated envisaged a multi-platform development with Kamelia hosting a central processing platform and the six other fields to be developed using satellite structures. That proposal has given way to a phased development comprising an early production system (EPS) at Kamelia and a multi-platform development centring on a host facility at Bergading. The decision to press on with the Kamelia EPS, expected to produce 40 million cu feet per day (mmscfd) of gas, stems from a need to partly offset a projected gas supply shortfall in Peninsular Malaysia. 
• Hess has earmarked US$250mil for the Kamelia EPS, now expected on stream by mid-2013, slightly delayed from 1Q2013. Recall that Singapore-based Ezra Holdings’s Emas Offshore and SapuraKencana Petroleum have been contracted to supply a FPSO and the wellhead platform respectively while Australia’s WorleyParsons was involved in the front-end engineering design. Offshore installation is scheduled to take place from the end of 2012 while the 3-year FPSO charter begin in June 2013. 
• Hess and Petronas are now aiming to launch the first tender for the multi-platform development for the rest of the nine fields. Hess has pledged to spend US$400mil annually from 2013 through 2015 on the multi-platform development. The first stage of the multi-platform development includes a central processing platform with living quarters to be installed using a float-over method at the Bergading field. While this production facility centrepiece is understood to have been designed to handle up to 450mmscfd of raw gas and 9 million barrels per day of condensate. Hess has previously flagged a peak production rate of 125mmscfd when the full field development is complete in 2015. 
• Bergading will host a wellhead riser platform with three similar satellite structures added in for the next development phase. The field candidates for the three other wellhead platforms remain unclear at this stage. However, Bergading, Kamelia and Zetung were included in the early days of project planning for the North Malay basin development. The new development plan also involves a tie-in to the Kamelia wellhead platform and potentially a lease on a floating storage and offloading vessel. Given local yard capacity constraints and the fast-track nature of the project, the North Malay basin development is among at least eight central platform projects that are being considered for regional tenders. But the main beneficiary for this fabrication tender is likely to be SapuraKencana Petroleum given its strong delivery record and 50%-60% yard utilisation currently. 
• We remain OVERWEIGHT on the sector given that Petronas’ RM300bil 2011-2015 capex programme is likely to accelerate next year onwards despite a slow start for the initial first two years. Our top BUY is Petronas Gas with other BUY being SapuraKencana Petroleum, Bumi Armada and Dialog Group.

Source: AmResearch