Published: Tuesday July 10, 2012 MYT 3:21:00 PM
JP Morgan upbeat on Malaysian marginal oil fields
KUALA LUMPUR: JP Morgan Asia Pacific Equity Research is upbeat on Malaysia's marginal oil field risk service contracts (RSC) due to the favourable risk reward, and local skillsets upgrade.
In a report issued on Monday, it said the first contract, valued at RM2.4bil saw Petroliam Nasional Bhd (Petronas) awarding it to a consortium comprising Petrofac, Kencana and SapuraCrest. The second (RM3bil) went to the Dialog-Roc Oil-Petronas consortium.
The most recent was Coastal Energy Co, listed on the Toronto and London Stock Exchange, for the development of the Kapal, Banang and Meranti cluster of small fields offshore Peninsular Malaysia. This was the third marginal oil field contract awarded out of 27 upcoming.
"We remain positive on the Malaysian oil & gas sector, a beneficiary of Petronas' RM300bil capex spending over the next five years," it said.
JP Morgan Research said the service contract will be based on a fee to cover service and infrastructure cost with a fair return over a particular tenure plus performance bonus for any additional production over and above the agreed threshold.
"Ownership of oil and gas will remain with Petronas, which will bear exploration risk. Each marginal oil field has reserves of 30 million barrels or equivalent (boe) or less, commercially viable when oil prices are at US$55 to US$60 a barrel.
"There are a total of 106 marginal fields with total reserves of 580 million boe in the country. Petronas has plans to develop only 25% or 27 of those fields, suggesting a total development cost of close to RM66bil over the longer-term," said the research house.