incentives for marginal fields

Incentives for marginal fields
Ahmad Kamarul Yunus
Published: 2013/10/25


KUALA LUMPUR: Local oil and gas industry players are looking forward for government incentives to attract investments into marginal fields and other upstream projects under 2014 Budget.

Other than incentives, Frost & Sullivan Asia Pacific director for energy practice Subbu Bettadapura said the industry players also hope that major projects like the RM60 billion refinery and petrochemicals integrated development (Rapid) project would be given a go-ahead.

Apart from further incentives to attract investments into marginal fields, Subbu said incentives from the government and Petroliam Nasional Bhd (Petronas) are needed to drive innovation among domestic oil and gas services providers.

"To strengthen the local oil and gas service providers, any further incentives to assist local service providers would be welcome," he told Business Times.

On marginal fields alone, analysts are predicting that Petronas will award the licences to develop up to 10 marginal fields under the third round of risk service contract (RSC), which already attracted some 12 local industry players to bid.

However, so far there has yet to be any announcements on the award of the licences to local and foreign industry players.

Petronas started implementing the RSC several years back as part of a move to lengthen the life of several O&G fields in the country.

Under this new arrangement, Petronas is the project owner while the contractor is the service provider. The contractors have to fork out upfront investment to develop the oilfield and produce the oil. In return they would be compensated accordingly with reimbursement costs plus remuneration fees for services rendered.

The first RSC -- the Berantai field -- was awarded to Petrofac and SapuraKencana Petroleum Bhd in January 2011, and the second to a consortium comprising Roc Oil, Dialog Group Bhd and Petronas Carigali Sdn Bhd in August 2011.

The third was awarded to Coastal Energy and Petronas Carigali in July 2012.

These contracts were said to be worth between US$800 million (RM2.42 billion) and US$1 billion (RM3.025 billion).

On the go-ahead of major projects, Subbu said this is in line with the government's aspiration to develop Malaysia as a downstream hub in the region.

"Development of Malaysia as a downstream hub, which is directly tied to the go-ahead for Petronas' Rapid project (in Penggerang, Johor).

"There are indications that there will be deferment of a few large infrastructure projects. The oil and gas industry players would be looking forwards to announcement on this Rapid project.

"The project's expected commissioning year is now mentioned to be 2018 (was 2016 earlier), while final investment decision is to be made in 2014," he said.