MALAYSIA'S oil and gas reserves may account for only 0.3% of world reserves, but its oil and gas sector is expected to grow significantly in view of more direct involvement of its players both locally and overseas.
Analysts said Petroliam Nasional Bhd (Petronas) had been a major catalyst in the development of the local oil and gas sector over the last 30 years.
“Now these companies, which have been supporting Petronas, have in turn, become significant players in the industry,” said an analyst with a local brokerage. And their presence on Bursa Malaysia helps to add depth to the local oil and gas sector.
Among the main listed players involved in upstream activities are Scomi Bhd, Petra Perdana Bhd, SapuraCrest Petroleum Bhd, Wah Seong (M) Bhd and Trenergy (M) Bhd.
The latest on the list is Perisai Petroleum Technology Bhd while steel fabricator, Ramunia Holdings Bhd, is expected to join the ranks soon after assuming the listing status of Saship Bhd.
In downstream operations, three of the major players are Esso Malaysia Bhd, Shell Refining (M) Bhd and Petronas Dagangan Bhd.
Petronas Gas Bhd has a 20% stake in Gas Malaysia Sdn Bhd, which has been given the task to develop the backbone of the gas distribution network for the country.
As at Jan 1, Malaysia's oil reserves and condensates ranked 27th in the world with a total volume of 4.84 billion barrels. Under the current production rate of 600,000 barrels per day, the reserves are expected to last 18 years.
Malaysia has a total of 494,183 sq km of oil exploration areas – 337,802 sq km in the continental shelf, 93,048 sq km in deep water and 76,413 sq km in onshore areas.
According to the analyst, the next impetus for growth in the industry would be in deepwater and ultra-deepwater exploration. (Deepwater refers to water depth of 200m to 1km and ultra-deepwater refer to water above 1km in depth).
Rising global demand for oil is expected to exceed supply, a factor that will spur further exploration activities (see chart).
“I don’t expect much interest in marginal oil fields, because it may not be economically viable,” said a sector analyst at Mayban Securities. This view was backed by the fact that there was no incentive announced by the Government in the last budget.
“Marginal exploration will continue but at a slower pace and is not likely to have much impact on the local oil and gas industry or the country reserves,” said the analyst.
With Petronas already expressing its intention to issue more production sharing contracts (PSCs) in these areas, the expected increase in activities will benefit local oil and gas players.
Malaysia has so far this year, announced four major oil finds off the coast of Sabah, with production in one of these blocks expected to begin in 2007.
“The recent success in deepwater exploration could be an impetus for the Government to push for more PSCs in these areas,” said a senior executive in an oil and gas exploration company.
However, the future signing of PSCs would depend on the success of negotiations between Malaysia and its neighbouring countries, such as Brunei and Indonesia, which had also made similar claims in certain exploration areas.
While the latest exploration activities could bring more benefit to the local oil and gas players, it is yet to be seen whether the current players will grow to become major players globally.
“These companies are mainly involved in supporting activities of the oil and gas industry and their potential is limited by the bigger players,” said an analyst with a local brokerage.
There had also been no news of the creation of a second national petroleum consortium company, he said, noting that such a set-up could involve high capital and risk.
For the time being, interest in the local oil and gas sector is limited to the few listed local players which have yet to impress investors with their earnings.
Petra Perdana, for instance, has seen its second quarter revenue down 30% to RM38.9mil from RM55.6mil in the previous corresponding quarter, while its earnings slipped to RM2.5mil from RM3.2mil year-on-year.
In the case of Dialog Group, its fourth quarter revenue ended July 31 rose by 24% to RM59mil from RM47.4mil in the same period last year.
However, Dialog's total revenue for the year was down by 17% to RM185.3mil compared with RM223.8mil last year. Dialog earnings for the year, however, improved to RM37.2mil versus RM30.8mil last year.
Overseas expansion has helped Scomi to record higher earnings. Its second quarter earnings had more than doubled to RM9.2mil compared with RM4mil in the same quarter last year.
Scomi's first half earnings this year was RM16.7mil, which was more than four times compared with the same period last year. Scomi's first-half revenue also tripled to RM166.1mil compared with RM50.3mil in the first half of last year.
·This is the final part of our series on “Commodities Boom.''