This article first appeared in The Edge Malaysia Weekly on September 18, 2017 - September 24, 2017
PETROLIAM Nasional Bhd (Petronas) is understood to have conducted a pre-award meeting for its maintenance, construction and modification (MCM) jobs, which translate into contracts collectively worth RM6 billion, sources say.
This means the long wait for the award of these contracts — valued at close to RM1 billion each — will soon be over.
“We had the pre-award meeting about a week ago, so the actual awarding should be soon,” says a source.
Another industry source says Petronas has divided the contracts for oil and gas platform maintenance. The earlier notion was that the national oil company would split the MCM jobs into six packages for a five-year duration but this is not certain yet.
It is understood that several bidders have been dropped and that it is the “usual suspects” that have won the lion’s share of the jobs.
The “usual suspects” include Dayang Enterprise Holdings Bhd, Petra Energy Bhd, Sapura Energy Bhd’s wholly owned SapuraKencana Pinewell Sdn Bhd, Carimin Petroleum Bhd, Deleum Bhd, Icon Offshore Bhd and privately held Borneo Sea Offshore Engineering Sdn Bhd.
Deleum and Icon are understood to have some form of tie-up on the operating level but not any formal joint venture.
While details are scarce, Dayang is understood to have bagged the contract to maintain oil platforms in Sarawak while Sapura is understood to have won the gas portion in the state. Deleum is said to have bagged a substantial contract in Peninsular Malaysia.
The integrated logistics contracts are slated to be awarded soon as well, although no details were available at press time.
News of the award of MCM contracts by Petronas augurs well for the domestic oil and gas industry, whose many players are still struggling to survive in the current low oil price environment.
Many felt the heat when the national oil company initiated the renegotiation of contract terms when crude oil prices collapsed in October 2014, and followed it with job cuts.
The MCM contracts will be timely for oil and gas players who can now replenish their order books, which has been a challenging task across the board.
Crude oil prices seem to have stabilised at between US$45 and US$55 per barrel. Concerns about a glut surfaced in June when crude oil dipped below US$45, thanks to some countries ramping up production after prices rose. Nonetheless, prices have rebounded from a low of US$44.82, the lowest level since November last year.
Analysts feel price stability is what counts whether crude oil is low at US$40 or high at US$100 per barrel. In the past, oil majors were cautious about capital expenditure partly due to the volatility.
Some oil majors are expected to increase their capital expenditure after they had slashed it for more than two years. Analysts see activity picking up in the sector with the demand for services expected to be high, although it would not be as robust when oil was trading at more than US$100 per barrel.
In June, UMW Oil & Gas Bhd was awarded two contracts with a combined estimated worth of US$34.81 million (about RM151.08 million) by Petronas Carigali Sdn Bhd. UMWOG will provide two jack-up drilling rigs to support Petronas Carigali’s offshore upstream projects.
In April, Malaysia Marine and Heavy Engineering Holdings Bhd won a RM1 billion contract for the central processing platform (CPP) in Petronas’ Bokor Phase 3 redevelopment project. The contract was awarded by Petronas Carigali.
Nonetheless, some industry players say the bigger concern could be obtaining financing as banks have become very cautious about giving loans to oil and gas-related companies after the oil price slump.
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