Thursday August 25, 2011

RM15bil Gas project to benefit TNB

By LEONG HUNG YEE
hungyee@thestar.com.my

Increased supply to alleviate utility firm’s gas shortage in the longer term

PETALING JAYA: The RM15bil gas exploration project in the North Malay Basin, to be undertaken by Petroliam Nasional Bhd (Petronas) and its production-sharing contract (PSC) partners, will benefit a number oil and gas companies as well as utility giant Tenaga Nasional Bhd (TNB).

Analysts said the project would provide a boost to the oil and gas industry as contracts would be dished out for the commissioning of the new project as well as the increase in gas volume for Petronas' customers.

A key customer is TNB, which has been facing prolonged gas shortage for months and is currently getting 30% less than it is supposed to. TNB said the gas curtailment exercise by Petronas had severely impacted its bottom line, prompting the company to issue a warning on its profitability and dividend payment.

The project will give assurance of supply in the longer term. But this will not solve the immediate gas shortage problem in the country. — SKR Research Head Chris Eng

On average, TNB was getting about 900 million standard cu ft per day (mmscfd), far from the usual rate of 1,250 mmscfd.

“It will be good for the industry. It means there will be more assurance of gas supply in the country. The project will give assurance of supply in the longer term. But this will not solve the immediate gas shortage problem in the country,” said OSK Research head Chris Eng.

A local bank-backed analyst said although the project would not solve the immediate gas shortage problem as the first gas was expected in 2013, the project was nevertheless a boost for Petronas customers.

“It remains to be seen how much gas will TNB get in the future, given the increase in gas capacity when the North Malay Basin project comes on stream,” he said.

Based on TNB's current gas power generation capacity, the volume needed is about 1,700 mmcfd. The power sector is entitled to about 1,350 mmscfd.

CIMB Research said the new project was a “positive development” forPetronas Gas Bhd, which would benefit from additional transport and processing revenues from 2013, when the first gas was expected.

The research house said Wah Seong Corp Bhd could also benefit from pipe-coating works.

OSK Research believes the first to benefit among the oil and gas support services providers would include fabricators (such as Kencana Petroleum Bhd and Malaysia Marine and Heavy Engineering Bhd), pipe layers (SapuraCrest Petroleum Bhd) and centralised tankage facilities operator Dialog Group Bhd.

The research house said there should be flow-through to vessel players like Perdana Petroleum Bhd, Alam Maritim Resources Bhd and Tanjung Offshore Bhd to transport the fabricated structures to the offshore platforms.

Subsequently, the hook-up and commissioning as well as brownfield service providers like Dayang Enterprise Holdings Bhd, Petra Energy Bhd and even Kencana may benefit from the initial set-up and maintenance activities on the platforms. KNM Group Bhd may also get some jobs for its process equipment segment even though the bulk of its sales are from outside Malaysia.

OSK Research analyst Jason Yap said the main objective of the project was to “help sustain the supply of gas” to Petronas customers in Peninsular Malaysia.

“And, in doing so, Petronas would be able to benefit from the recently introduced incentives by the Government, particularly for the development of marginal fields, high carbon dioxide gas fields and fields located in high-pressure, high-temperature conditions.

“Also, with the gradual revision of gas prices to domestic customers by the Government, this helps to make the project more economically feasible for Petronas and its PSC contractors,” Yap said.

On Tuesday, Petronas said it was embarking on the North Malay Basin upstream project to extract gas from fields off Peninsular Malaysia.

Petronas said the project comprised nine discovered gas fields within Blocks PM301 and PM302 and in the Bergading contract area, about 300km off the peninsula's coast.

“It will also involve the development of a new 200km pipeline to transport gas from the fields to Kertih, Terengganu. The project is estimated to cost RM15bil.

“Petronas and its PSC partners are undertaking the project on an accelerated basis. First delivery of 100 million mmscfd is expected by early 2013, ramping up to 250 mmscfd by 2015,” it said.