KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) has awarded two production-sharing contracts (PSC) for oilfields in Sabah to a consortium comprising SapuraKencana Petroleum Bhd, the Sabah state government and Petronas Carigali Sdn Bhd.

This is the first PSC awarded to a local consortium since Petronas was formed in 1974. Sabah is  the first state government to participate directly in oil production activity.

The contracts are to develop Blocks SB331 and SB332 near Sandakan basin in eastern Sabah.

Under the PSC, SapuraKencana Petroleum’s wholly-owned subsidiary SapuraKencana Energy Sabah Inc (SKESI) will own 70% of the two oil blocks while Sabah government’s wholly-owned unit M3nergy Bhd will hold up to a 25% equity interest. Petronas Carigali will hold the remaining shareholding.

The award was made after an international bidding exercise in which Petronas invited bids from upstream companies for these blocks. SapuraKencana’s SKESI was selected as the winner of the bidding exercise, which took place last year.

The PSC was signed yesterday by Petronas executive vice-president and chief executive officer (CEO) for upstream, Datuk Wee Yiaw Hin; SapuraKencana president and group CEO Tan Sri Shahril Shamsuddin, M3nergy director Tan Sri Sukarti Wakiman and Petronas Carigali president and CEO Datuk M Anuar Taib.

According to Petronas’ statement, “there have been minimal activities in the blocks but the presence of oil and gas seeps indicate a probable working petroleum system”.

Blocks SB331 and SB332, measuring 13,114 sq km and 17,933 sq km, respectively, are located onshore in the eastern part of Sabah.

Petronas said the PSC partners are committed to drilling two wildcat wells and acquiring 500 line km of new 2D seismic data in Block SB331 and drilling one wildcat well and acquiring 100 line km of new 2D seismic data in Block SB332.

The PSC partners are also committed to carrying out other integrated studies based on the existing data for the two blocks.

SKESI became a wholly-owned subsidiary of SapuraKencana following the successful acquisition of Newfield Malaysia in early 2014 and has grown its energy division with massive discoveries in the SK408 PSC.

As for M3nergy, the acquisition of the oil and gas company by Sabah Development Bank paved the way for the Sabah government to increase its participation in the local oil and gas (O&G) industry.

Earlier this month, Prime Minister Datuk Seri Najib Razak assured Sabah that it would continue to get more revenue from its O&G resources.

Najib pointed out that apart from the O&G royalty of 5%, Sabah was also given a 10% stake in Petronas LNG Train 9 Sdn Bhd in Bintulu, Sarawak, which would generate additional revenue to the state and its people.

This article first appeared in The Edge Financial Daily, on November 21, 2014.