WILL more risk service contracts be taken over by Petroliam Nasional Bhd (Petronas) and its unit Vestigo Petroleum Sdn Bhd?
This question emerged after Vestigo took over the operations and maintenance of the Berantai field from SapuraKencana Petroleum Bhd and Petrofac Energy Developments Sdn Bhd last month.
Earlier in February, the RSC for Roc Oil Malaysia (Holdings) Sdn Bhd, Dialog Group Bhd and E&P Venture Solutions Sdn Bhd to operate the Balai cluster was terminated.
In emailed responses to questions from The Edge, the national oil company says: “Petronas continues to review each field on a regular basis to determine the appropriate plan and action for each of them. Each marginal field requires different technical and commercial solutions — combined with an environment conducive to business — to make it viable.
“The RSCs were designed to protect Petronas’ interests, particularly in the event of an unfavourable external industry environment, and Petronas will exercise these rights where necessary.”
Issues with RSCs arose after oil prices plunged from US$110.53 in September 2013 to a multi-year low of US$26 in February this year. While oil prices have since clawed their way back to US$40 per barrel, they are still way off the average of about US$100 in 2013.
Checks with the Companies Commission of Malaysia indicate that there was good reason for the termination of the RSCs for the Balai cluster and Berantai field.
BC Petroleum Sdn Bhd — the company awarded the RSC for the Balai cluster, in which Roc Oil Malaysia had a 48% stake, Dialog Group, 32%, and E&P Venture Solutions, 20% — suffered an after-tax loss of RM54.57 million without any revenue for the year ended December 2014. It had current assets worth RM542.03 million and no non-current assets. On the other side of the balance sheet, the company had short-term debt commitments of RM362.47 million and no long-term borrowings.
With oil prices headed south, FY2015 is likely to have been worse for BC Petroleum.
Similarly, Petrofac Energy Developments — which owned 50% of the RSC to operate the Berantai field — posted an after-tax loss of RM73.31 million on revenue of RM459.16 million in its financial year ended December 2015. It had non-current assets of RM2.03 billion, current assets of RM940.22 million, non-current liabilities of RM2.56 billion and short-term borrowings of RM525.76 million in FY2015.
Petronas explains: “Under the RSC arrangement, Petronas remains the project owner while the contractors act as the service providers. Up front capital investment was contributed by the contractors who will receive certain scheduled reimbursement, fees and other payments commencing from first production and throughout the duration of the contract based on oil and gas production as well as certain key performance indicators. The onus is on the contractors to ensure the field performs according to targets set by Petronas to earn the fees and payments.
“As part of the terms of the RSC, Petronas could elect to end the RSC early depending on the economics of the project and in such a case, Petronas is required to reimburse the contractor all outstanding capital and operational expenditure.”
On the Berantai field specifically, the oil company says: “The cessation of the Berantai RSC was exercised by Petronas as provided for under the RSC terms in view of the unfavourable external environment brought about by the prolonged oil price crisis. These terms were included in the RSC as part of Petronas’ strategic and long-term view of the industry, and to safeguard its interests through continuous review of its portfolio to ensure prudent cash and cost management for the entire group.
“In accordance with the RSC terms in the event of a cessation, Petronas, the asset owner, is required to reimburse the contractor all outstanding capital and operational expenditure. The cessation also in effect transfers the ownership of the Berantai FPSO to Petronas, which gives Petronas the flexibility and opportunity to manage the asset better.”
Now, all eyes are on the remaining three RSCs, excluding Tembikai and Chenang, which were already awarded to Vestigo.
The three RSCs are: the Kapal, Banang and Meranti cluster, which was awarded to Coastal Energy KBM Sdn Bhd, in which Coastal Energy has a 70% stake and Petra Energy Bhd, 30%; the Ophir field to Ophir Production Sdn Bhd, which is a joint-venture company between Scomi D&P Sdn Bhd — a unit of Scomi Energy Services Bhd — Octanex Pte Ltd and Vestigo Petroleum on a 30:50:20 basis; and the Tanjong Baram field to EnQuest Petroleum Developments Malaysia Sdn Bhd and Uzma Energy Venture (Sarawak) Sdn Bhd, a unit of Uzma Bhd.
Vestigo seems to be doing well. It says it shaved US$16 million (RM64.82 million) off the original budget for Tembikai and Chenang and took only two months to complete the front-end engineering for the field — a fraction of the industry norm.
Says Petronas, “The appointment of Vestigo is in line with Petronas’ effort to extend the economic life of the field and maximise the long-term value of the asset. As a subsidiary of Petronas Carigali, Vestigo is better positioned to leverage accessible resources, synergies and flexibility to manage the fields of Peninsular Malaysia.”
Interestingly enough, Petronas says Vestigo is not the only company available or eligible for the development of marginal fields in Malaysia.
“In the case of Berantai, Vestigo is only appointed to continue the operations and maintenance of the field on Petronas’ behalf after the cessation of the RSC. The appointment of Vestigo is in line with Petronas’ effort to extend the economic life of the field and maximise the long-term value of the asset,” it adds.
Vestigo had yet to file its financials to the CCM and its latest financial results were for FY2013 prior to it commencing operations.
Ophir field
Industry sources say there have been meetings between the three partners — Scomi Energy, Octanex and Vestigo — one quite recently, and things are moving forward with the likely award of a contract for a floating, production, storage and offloading vessel quite soon.
In late November last year, Muhibbah Engineering (M) Bhd was awarded the engineering, procurement, construction, installation and commissioning of a wellhead platform for the RSC for the Ophir field. The contract is valued at RM100 million.
Ophir was slated to have commenced the production of hydrocarbons in early 2016 but in September last year, Petronas revised the field development plan and cut the cost of production by 30%.
In its financial year ended December 2014, Ophir suffered an after-tax loss of RM5.09 million on the back of RM24.79 million in revenue. The results are likely to be slow because the field has yet to start producing.
Whether Ophir gives Scomi Energy Services a shot in the arm remains to be seen. In its financial year ended March 2016, Scomi Energy Services recorded a net loss of RM2.88 million on revenue of RM1.25 billion.
Kapal, Banang and Meranti field
Industry sources say the Kapal, Banang and Meranti RSC is working very well. In its first financial quarter of 2016, Petra Energy suffered a net loss of RM7.08 million on revenue of RM113.23 million. However, its associate Coastal Energy KBM contributed a net profit of RM10 million to Petra Energy. In FY2015, Petra Energy’s share of Coastal Energy KBM’s net profit was RM55 million.
In Petra Energy’s annual report, it is stated that in February this year, Coastal Energy KBM achieved 10 million barrels from the RSC for a cluster of small fields off the shores of Terengganu.
As at end December 2014, Coastal Energy KBM had current assets of RM780.99 million and non-current assets of RM4.32 million. On the other side of the balance sheet, there were short-term debt commitments of RM779.72 million and no long term borrowings.
It is likely that Coastal Energy KBM’s FY2015 results were impressive.
Tanjong Baram field
A look at the 70% shareholder of the RSC — EQ Petroleum Developments Malaysia Sdn Bhd — reveals that for the year ended December 2014, the company made an after-tax loss of RM4.4 million with no revenue generated. The company had current assets of RM144.32 million, non-current assets of RM77.32 million and current liabilities of RM225.84 million. It had no long-term debt commitments.
First oil was actually struck in mid-August last year and Petronas said the Tanjong Baram field is estimated to produce 2,000 barrels per day.
While two of the RSCs — Kapal, Banang and Meranti, and Tanjong Baram — seem to be performing, and Ophir is likely to commence operations soon, all eyes are likely to be fixed on RSCs, for the near term at least.
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