Monday 8 October 2012

Oil & Gas Sector - Scaled-down slower St Joseph CEOR, but Angsi in on NEUTRAL


- Upstream reported that  Shell has scaled down the early engineering design of its pilot vessel-based chemical enhanced oil recovery (CEOR) project at its mature St Joseph oilfield off Sabah, Malaysia to 2,000 barrels per day (bpd) of water from 10,000 bpd and an alkaline-surfactant-polymer cocktail due to concerns over the earlier budget of US$200mil-US$250mil for the vessel.

- The new concept also centres on a potentially leased vessel with an integrated module of between 250 and 360 tonnes. The module will be a standalone unit that can be installed on board with minimal tie-in to avoid re-classification of the vessel. Technip is understood to be carrying out the studies under a standing 5-year design contract in Miri with Shell. Houstonbased Water Standard had been brought in to support the conceptual development, now expected to be completed later this quarter ahead of entering into front-end engineering and design before the end of 2012. 

- BW Offshore, M3nergy, Bumi Armada, SapuraCrest, Delcom and Tanjung Offshore were interested in the earlier tender for the St Joseph CEOR vessel. But the award of the engineering procurement contract (EPC) has now been extended to the second quarter of 2013 from late this year. The duration of the pilot phase at St Joseph currently remains unclear, but Shell had earlier expected to reach a decision at the end of the first year of operations on whether to enter into the first phase of expansion. If the project is deemed economically viable, Shell is also expected to tender for a larger vessel to support the full field injection of 130,000 bpd. 

- The sailaway of the vessel from the selected fabrication yard is targeted for early 2014, suggesting a slight delay from the previous schedule to start up operations in late 2013. The St Joseph CEOR is the first amongst the US$12bil (RM36bil) enhanced oil recovery (EOR) production sharing contracts (PSC) between Petronas and Shell. The EOR PSC also covers CEORs at the South Furious, SF-30 and Barton fields, also off Sabah, as well as a water-alternate-gas EOR for the Baram Delta Operations off Sarawak.

- However, Upstream indicated that the field operator may look at tapping the CEOR vessel currently under development for Petronas Carigali’s Angsi field off Peninsular Malaysia. Petronas Carigali is understood to have formed a joint venture with MISC to own and operate the Angsi CEOR vessel. The  joint venture had commissioned Malaysia’s MMC Oil & Gas Engineering and Water Standard of the US to carry out the front-end engineering and design studies, now expected to be completed as early as the end of this month. MMC Oil & Gas and Water Standard are well-placed for the EPC, which is likely to be awarded in early 2013. The Angsi CEOR vessel, which will be equipped with 15 days of storage to support a water injection capacity of 150,000 barrels per day, is expected to start operation in the first half of 2014.

- For upstream development, the capex upward trend is still intact, but the momentum of new contract rollouts has temporarily shifted from pure fabrication to offshore installation works in the sector’s value chain. We note that large central processing platform awards for the North Malay Basin Phase 2, as well as the Bokor, Dulang and Semarang fields could slip into early next year from earlier expectations of this year. We maintain our Neutral stance on the sector with our top BUYs being Dialog Group and Petronas Gas.   

Source: AmeSecurities

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