M3nergy a Sabah govt vehicle for O&G ventures

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SINGAPORE: M3nergy Bhd, a wholly-owned oil & gas (O&G) outfit of Sabah Development Bank Bhd, intends to participate in the development of oilfields off Sabah.

“M3nergy is important to the [Sabah] state. The company will be a platform for Sabah to be involved more in upstream O&G activities,” said M3energy executive director Kevin How after the launch of the company’s second floating production storage offloading (FPSO) vessel in Singapore on Tuesday.

He noted that the Sabah state government has lagged behind in terms of O&G activities.

“There are lots of oil awaiting exploration and development off Sabah. Petroliam Nasional Bhd (Petronas) is helpful. It is looking at those opportunities which may be made available to Sabah [companies],” said M3nergy group managing director and chief executive officer Datuk Shahrazi Sha’ari.

However, Shahrazi stressed that the national oil company practises open tender to award contracts.

“It doesn’t mean that we (the Sabah government which owns M3nergy) can go to Petronas to ask for contracts,” said Shahrazi, who joined the company in 2004.

According to Shahrazi, having Sabah Development Bank as the sole owner has been an advantage as the bank has provided bridging financing for M3nergy. For instance, that of its latest FPSO vessel that has cost US$250 million (RM815 million) to US$300 million to buy and convert the old Aframax tanker.

The FPSO will be anchored at Bukit Tua field on a five-year contract with Petronas Carigali Ketapang II Ltd (PCK II), with an option of two years’ extension.

Bukit Tua field is off east Java Island, Indonesia. The oilfield is operated by PCK II, a joint venture between  Petronas, which holds an 80% stake, and PT Saka Ketapang Perdana, which owns the remaining 20%.

Shahrazi declined to reveal the value of the new charter contract, except that it is expected to contribute half of the company’s revenue.

“The new contract will provide us a new income stream going forward,” he said.

How added that the contract will help M3nergy to return to the black next year.

M3nergy currently owns two FPSO vessels and one floating storage offshore (FSO) vessel. One FPSO vessel will be out of chartered services soon.

“We are looking for a new contract for the FPSO vessel now,” said Shahrazi, who does not foresee any difficulty to secure one despite the softening crude oil prices that have sparked concerns about a possible slowdown in the upstream O&G sector.

So far, M3energy has secured two FPSO vessel charter contracts from Petronas.

M3nergy is formerly known as Trenergy Bhd, in which Melewar Group held a substantial stake then. It was delisted in 2010 through a management buyout. Sabah Development Bank took over the loss-making company last year.

Shahrazi said the company does have relisting plans, but not so soon. “Relisting will probably be in a couple of years. At the moment we need to restructure and gain a better financial foothold first.”

Besides FPSO and FSO vessels, M3nergy owns and operates an oilfield in Ujong Kulon, Indonesia, under a production-sharing contract.

Drilling activity will start in the first quarter of next year, said Shahrazi.

This article first appeared in The Edge Financial Daily, on October 23, 2014.