Published October 24, 2008

Petronas awards RM5b deals

Despite slide in oil price, it's holding up exploration, development work

By PAULINE NG
IN KUALA LUMPUR

	Email this article
	Print article
	Feedback

DEMONSTRATING its intent to maintain exploration and development activity despite the rapid fall in oil prices, Malaysia's Petronas yesterday awarded contracts worth RM5 billion (S$2.1 billion) to five local fabricators.

Priming the pump: When completed in 2010-2011, the new offshore facilities are expected to boost Malaysia's gas production by about 14 per cent from the current 6.6 billion standard cubic ft

Malaysia Marine & Heavy Engineering (MMHE), Sime Darby Engineering, Kencana HL, Ramunia Fabricators and Oilfab have been given 15 contracts valued at RM2.8 billion for four projects by the oil major's exploration and production arm Petronas Carigali.

Besides these fixed works, Petronas expects to allocate a further RM2.2 billion for variable costs such as equipment and services incurred in the projects.

When completed in 2010-2011, the new offshore facilities are expected to boost Malaysia's gas production by 950 million standard cubic ft per day or about 14 per cent from the current 6.6 billion scf.

Petronas said the extra gas output will 'enhance the security of supply to the domestic and export markets'. Under the terms of the contracts, the contractors have to procure and construct components of facilities for the development of gas fields - one each off Sabah, Sarawak and Peninsular Malaysia.

The fourth project is the enhancement of gas compression capacity at Dulang Field off Terengganu.

Units of two government-linked companies collected most of the works. MMHE, a subsidiary of Malaysia International Shipping Corporation - Petronas's shipping arm - was awarded two contracts valued at RM1.17 billion, while Sime Engineering's three amount to RM1.12 billion. Kencana's three contracts are valued at RM288 million, Ramumia's at RM140 million and Oilfab's at RM102 million.

'These are some of the biggest contracts in recent years awarded to our local fabrication companies,' Petronas's vice-president for corporate services Ahmad Nizam Salleh said at yesterday's signing ceremony.

Procurement and construction work are expected to start this quarter.

Mr Ahmad said the awards will help raise local standards. Petronas wanted to ensure the fabrication works were done in Malaysia to maximise local content.

The company has repeatedly highlighted the need to conserve Malaysia's oil and gas resources, given they are comparatively small.

In July, when it announced its fiscal year ended March 2008 results, it said subsidies were ballooning out of control. Its subsidy to the gas sector last fiscal year was almost RM20 billion or a quarter more than the previous year.

Almost 60 per cent of the subsidy went to Malaysia's independent power producers, who say the subsidies keep power rates reasonable for the public and industry.

Malaysia's natural gas reserves estimated at 88 trillion cubic ft, compared with Russia's 1,680 trillion cubic ft.

Agencies such as Khazanah Nasional and state utility Tenaga Nasional have expressed concern that a national energy policy is urgently needed to ensure these resources are better safeguarded and supply security improved.