Oil and Gas Industry

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Annual Report 2012 63High Cost and Expensive Technology• As deepwater exploration is more complicated anddangerous than onshore fields, operation cost andproduction cost lifting of oil to the surface tends to behigher. Financing for the equipment and technology maynot be easily come forth by financiers due to uncertaintyand riskiness of the project viability while economic returnwill only be realized in the long-term. The removal ofrig after drilling proves just as costly as construction.The overall drilling expenditure is expected to increasewith more offshore drilling undertaken by international oilcompanies, national and government worldwide.Leasing/Charter Rates• Since the global financial crisis, the leasing rates of rigsexcept for jack ups have not been recovered due tosluggish demand. The leasing rates, move in tandem withthe development in the industry while search for offshoreE&P depends on future demand for oil of which it is highlysusceptible to economic growth.• The charter rates for jack ups have improved from morethan US$130,000 per day to more than US$150,000 a daysince the last two years. Meanwhile, new rigs equippedwith special features will continue to be in demand toservice more complex wells as well as remote reservoirs.Of the total numbers of rigs worldwide, US dominates themost, followed by Canada and others.Factors Influencing Industry and Operating Environment of Oiland Gas Players– Government regulations, including environmentalregulations, which affect production cost and may limit thequantity of oil and natural gas that may be economicallyproduced.– Industry regulations that entail licensing and parameterswithin which the industry operates, which may dictateentry barriers.– Market growth prospects and/or emergence of newcompetition (including accessibility of prospects oruntapped reserves).– Outlook for global economic growth.– The balance between supply and demand as indicated byglobal inventory levels.– Potential supply disruptions, including geopoliticaldevelopments.– The degree to which individual OPEC nations and otherlarge oil and natural gas producing countries are willingand able to control production and export of oil.– Technological advancements that improve total recoveryand productivity.– Prospects for alternative energy and/or substitutes.– Ability of oil and natural gas companies to gain access tofunds to carry out their E&P plans.Conclusion• The landscape of the oil and gas industry is characterisedby high barriers to entry which mainly revolve aroundhigh capital requirements and technical expertise.Contracts from major oil companies are only given tocompanies that have proven their capability in deliveringquality works while complying with very strict safetyrequirements. Companies owned and controlled byMalaysians are preferred over foreign companies, tomeet national aspirations in developing the capability andcapacity of local oil and gas companies.• The Malaysian oil and gas sector is on course fora structural reform caused by a flagging productionwhich threatens to bestow a net importer status on thecountry.• To combat this, PETRONAS has launched a RM300bil 5year capex programme with the primary goal of increasingExploration and Production (E&P) through the award ofmore Production Sharing Contracts (PSCs) and to revitalizeits production predominantly through an Enhanced OilRecovery (EOR) and marginal oilfield Risk Service Contractprogramme.• The advent of deepwater exploration and production isexpected to increase the demand for offshore supportservices as these petroleum fields lie at a greater distancefrom the shore. This new development will create greaterdemand for new series of OSVs, which have the capabilityin operating at deepwater oil fields for operational supportand maintenance services.
Oil and Gas IndustryAnnual Report 201264Bank PembangunanMalaysia Berhad (16562-K)Contract Bids Up for Grabs in 2013Project typeDetailsEstimated value(RMbn)Notable potentialbeneficiariesMarginal oilfields • 2-3 fields 5-8 bil Bumi Armada, Dialog, Sapura Kencana,Scomi MarineEOR projects• Bokor, Dulang, Semarang• Seligi, Guntong Semangkok,Irong• Angsi field, St Joseph, SouthFurious & Barton fieldsHPHT projects• Baram Delta fieldsDeepwater• MalikaiGas fields• North Malay Basin• 3 fields with respectiveCPP and satelliteplatform• Fabrication of offshorestructures• CEOR floating solution0.6-1.6/field3-5 bil• Sapura Kencana (HUC and fabrication),MMHE• Sapura Kencana (HUC and fabrication),MMHE• Bumi Armada, MISC• New CPP, 6-7 satellite na• MMHE, Sapura Kencana, TH Heavyplatform upgrades• 1 Tension Leg Platform 1.5-2 bil • MMHE• Floating solutions,platform equipment(EPCC) and 200 kmpipeline15 bil • Bumi Armada, MISC, Sapura Kencana,Petronas Gas (gas transmission),WascoFloating solutions• Belud field• Dahlia, Teratai • FPSO na • Bumi Armada, MISC, M3nergyNew shallow-water blocks• Cakerawala and Muda gas fieldsDownstream• Regasification terminals, Lumut,Pengerang• Fabrication of platformsand rigsna• 2 terminals 2.0 (Lumut), 4.0(Pengerang)• MMHE, Sapura Kencana (Fabrication,HUC, tender rigs), Wasco• Petronas GasHookup and Commissioning (HUC)• Pan Malaysia umbrella contract • 10 job packages 8-10 bil • Sapura Kencana, Dayang, AlamMaritim, Petra EnergyOffshore Support Vessels (OSV)• Petronas Carigali charter • 34 OSV charters 2-3 bil • Bumi Armada, Dayang, Alam Martitim,Perdana PetroleumSource: CLSA Asia-Pacific MarketsReference:• The Oil & Gas Year• CLSA Asia-Pacific Markets• Economic Transformation Programme (ETP)
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