West Malaysian company gets Sarawak oil field development project from Petronas

Posted on August 18, 2011, Thursday

CONTRACT INKED: The contractor group comprises of Dialog, Roc Oil and Petronas Carigali through a SFRSC with Petronas. Analysts say this will enhance Dialog’s exposure in the upstream industry, Petronas Carigali will assist in knowledge sharing and smoothen the consortium’s learning curve and the two tier development phase will ensure the viability of the field which reduces execution risks.

KUCHING: Dialog Group Bhd (Dialog) and its partners signed the much anticipated small field risk service contract (SFRSC) with Petronas for the development and production of the Balai Cluster fields which are located offshore Bintulu.
Dialog’s portion of the SFRSC was 32 per cent while partners ROC Oil Holdings Sdn Bhd and Petronas Carigali Sdn Bhd would have 48 per cent and 20 per cent respectively.
According to RHB Research Institute Sdn Bhd (RHB Research), the development of the marginal field contract was segregated to two phases, and was for a total period of 15 years. It also noted that the cumulative cost for the project was between US$850 million and US$950 million.
Additionally, OSK Research Sdn Bhd (OSK Research) explained that the first phase involving pre-development would be carried out with the objective of determining the economic viability of the fields to cost between US$200 million and US$250 million and was scheduled to commence in second half of 2011 for the duration of 18 months.
As for the second phase, the development programme would take 24 months before production from all the fields in the cluster was expected to start and the total cost of the development phase was estimated at US$650 million to US$700 million.
Most research firm were positive on the awarded marginal field with RHB Research rationalising that the contract would enhance Dialog’s exposure in the upstream industry, Petronas Carigali as an equity stake holder would assist in knowledge sharing and smoothen the consortium’s learning curve and the two tier development phase would ensure the viability of the field which reduced execution risks.
Nonetheless, Kenanga Research suggested that the contract would help Dialog to make two streams of income from engineering, procurement, construction and commissioning (EPCC) jobs and fee for extracting the oil.
However, OSK Research argued that developing two marginal oilfields (Bentara and Balai) concurrently
might possibly be too big a challenge to the contractor group and hence Petronas would not want to take such risks despite its aim to accelerate oil and gas production given that reserves were depleting.
On a lighter note, OSK Research noted that the oilfield was still owned by Petronas and hence the risk should not be borne by the contractor group and the contractor group would still get fair returns from Petronas for their efforts during the development stage.
In conclusion, AmResearch Sdn Bhd and OSK Research pegged a fair value of RM3.20 and RM3.43 per share respectively while RHB Research pegged at higher fair value of RM3.90 per share.