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O&G contracts for M’sian operators fall 61%

TheEdge Tue, Jul 12, 2016 - 2 years ago

This article first appeared in The Edge Financial Daily, on July 12, 2016.


Oil and gas sector
July 11

Maintain neutral call: For the upstream, it is reported that Repsol has reset the first oil date from the third quarter of 2018 (3Q18) to 2019 for its Ca Rong Do oil and gas project in Vietnam, after receiving updated contractor submissions from major service providers. The project has been in hibernation for the last six months, given the plunge in crude oil prices since early this year.

The project’s unchanged development concept involves a tension-leg wellhead platform (TLP) tied back to a floating production, storage and offloading (FPSO) vessel. The floater will have processing capacity of between 25,000 and 30,000 barrels per day of oil, and 60 million cubic feet per day of natural gas. It will be capable of storing about 500,000 barrels of oil, and be moored to the seabed by a fixed internal or external turret system. The platform will float in water depths of up to 350m and host up to 12 wells.

A fixed-term FPSO lease of eight to nine years, together with operations and maintenance, will be open for bidding by PetroVietnam Technical Services Corp’s (PTSC) production services division. Three companies are expected to compete for the leased FPSO — Yinson Holdings Bhd, Bumi Armada Bhd and UK-listed Petrofac. We believe Yinson, which owns a 49% stake and operates FSO Bien Dong 01 and FPSO Lam Son in Vietnam with a strong and proven track record, has the edge in securing this project.

The TLP for Ca Rong Do is planned to be connected via a subsea flow line to the FPSO, which will provide full oil and gas processing capability. The TLP contractor will partner with PTSC in the construction of the platform, which could be up for tender between Modec and possibly Floatec. The upstream indicated that Floatec, a joint venture (JV) between Keppel Fels and McDermott, could continue to pursue Ca Rong Do despite the end of most of its Houston operations.

Repsol has indicated Ca Rong Do as a “quite strong” project with oil prices at US$55 (RM219.45) to US$75 per barrel.

Repsol has said its net investment devoted to the Ca Rong Do project amounts to US$630 million between 2015 and 2019, with a total commitment of US$1.1 billion for the JV.

Ca Rong Do is operated by Repsol with a 55% stake, Pearl Energy (Mubadala Petroleum) (25%), PetroVietnam E&P (15%) and Pan Pacific Petroleum (5%).

According to JV partner Pan Pacific, the gross best estimate of potential recovery from Ca Rong Do is 45.3 million barrels of oil, 172 billion cubic feet of gas and 2.3 million barrels of condensate.

Total contracts awarded to Malaysian operators in 2Q16 fell 61% quarter-on-quarter (q-o-q) and 78% year-on-year (y-o-y) to RM852 million. For the first half of 2016, total contracts fell 30% y-o-y to RM3 billion. Pending greater clarity on an upward crude oil price trajectory and resolution of recapitalisation issues for a number of players, we reiterate our “neutral” call on the sector. We prefer companies with stable and recurring earnings, such as Dialog Group Bhd and Yinson. Our “hold” calls are for Petronas Gas Bhd, MISC Bhd, Bumi Armada, SapuraKencana Petroleum Bhd and UMW Oil & Gas Corp Bhd. — AmInvestment Bank Research, July 11

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